Zomato, Paytm May Enter F&O Segment After SEBI’s New Rules

SUMMARY

As per Nuvama, as many as 18 stocks could exit the F&O market while 78 new companies may enter the derivatives markets due to SEBI’s new rules

The brokerage firm said that the exit review should “ideally” happen in December 2024 as the criteria would come into effect three months after the date of issuance of the circular

SEBI has increased MQSOS over the last six months on a rolling basis by 3X to INR 75 Lakh while MWPL over the previous six months has been increased to INR 1,500 Cr

Brokerage firm Nuvama believes that the new exit and entry criteria for stocks in the derivatives market may pave the way for new-age tech stocks such as Zomato, Paytm and Jio Financial Services (JFS) to enter the futures and options (F&O) segment.

Nuvama said this in a note released a day after the Securities and Exchange Board of India (SEBI) implemented the altered eligibility criteria for entering and exiting stocks in the F&O segment.

The new mandates, as per SEBI, have been formulated to ensure that only stocks with “sufficient market activity” are allowed to participate in the derivatives segment.

As per the Nuvama note seen by Economic Times, as many as 18 stocks could be in line to be axed from the F&O market owing to the new methodology. However, as many as 78 new companies may enter the derivatives markets.

The report by the brokerage firm added that the exit review should “ideally” happen in December 2024 as the criteria based on performance would be applicable three months after the date of issuance of the circular.

Under the new rules, SEBI has increased the median quarter sigma order size (MQSOS) spanning a period of past six months, on a rolling basis by 3X to INR 75 Lakh as against INR 25 Lakh previously. CIting its rationale for the move, the market regulator said that the average market turnover has surged by more than 3.5X since the last review.

The new rules also increase the market wide position limit (MWPL) for a stock over the previous six months to INR 1,500 Cr from INR 500 Cr previously. On this, SEBI said that market capitalisation had soared more than 2.8X since the last review.

Additionally, the market watchdog has also raised the average daily delivery value (ADDV) for a stock in the cash market to at least INR 35 Cr from INR 10 Cr owing to a significant increase in the metric since the last review.

The development comes at a time when new-age tech stocks have been on an upswing on the back of their profitable numbers and positive market sentiment.

Shares of Zomato have surged over 102% on a year-to-date (YTD) basis on the BSE, while the stock has zoomed 151% in the past 12 months.

On similar lines, shares of Jio Financial Services (JFS) have risen by 38% and 39% on a YTD basis and in the last 12 months, respectively.

The only exception appears to be Paytm, which has been hit by regulatory troubles. The stock has dipped over 2% on a YTD basis. The fintech major’s shares have also declined more than 27% in the past 12 months.

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