Jefferies Highlights Recovery in India’s Derivatives Market and Top Stock Picks

India’s derivatives market appears to be stabilizing following disruptions caused by the introduction of the closing auction session (CAS), according to a recent report from international brokerage Jefferies. After a significant decline in options trading volumes in August, September brought signs of recovery with volumes returning to levels comparable to those before the CAS was launched on August 3.

The CAS mechanism altered how closing prices are determined for stocks within the futures and options (F&O) segment, initially creating volatility and uncertainty among market participants. Jefferies noted that the September average daily turnover (ADTO) for index option premiums across the industry reached Rs 68,100 crore, closely matching figures from July prior to CAS implementation. This rebound was attributed to easing issues related to the new closing price calculation method and an increase in market volatility, reflected in a spike in the VIX index.

Breaking down the performance of key exchanges, Jefferies observed a 24 percent month-on-month increase in BSE’s average daily turnover during September, rising to Rs 23,200 crore. While BSE’s share of the options market slightly dipped to 34.1 percent from 34.7 percent, this was influenced by an extra expiry session on the NSE. Additionally, BSE’s cash market share climbed to 8.8 percent in September, marking a third consecutive month of growth, a trend supported by a major IPO on the NSE platform.

Meanwhile, the Multi Commodity Exchange (MCX) saw a mixed picture with options ADTO climbing 21 percent month-over-month but futures ADTO declining by 7 percent. The surge in options trading was particularly strong in the energy segment, where turnover grew 44 percent compared to the previous month. This increased activity in energy options helped position MCX as one of Jefferies’ preferred picks among capital market stocks.

Jefferies also highlighted the prospects for Groww, the online investment platform, which may benefit from several positive trends. The company’s margin trading facility (MTF) book had plateaued in August but then rose by 10 percent in September to Rs 4,300 crore. Concurrently, commodity trading volumes on Groww’s platform increased by 26 percent sequentially in the second quarter of fiscal year 2027. These factors suggest improving order flows and a strengthening position in commodity markets.

In addition to Groww and MCX, Jefferies identified KFIN Technologies and Nuvama as top capital market stock picks. The brokerage pointed out that large asset management companies (AMCs), excluding Nippon Life India Asset Management, experienced a decline in their equity assets under management (AUM) market share during September. Conversely, AMCs outside the top five saw their share among the top 15 equity schemes rise, indicating shifting dynamics within the mutual fund industry.

The brokerage also noted positive trends for depositories, with increases in delivered quantities, IPO activity, and new demat account openings. These developments contribute to a more active and liquid market environment.

Jefferies’ analysis provides insight into how the Indian capital markets are adjusting to recent regulatory changes while highlighting specific companies positioned to benefit from evolving market conditions. The recovery in options volumes and the rise in commodity and IPO activity reflect broader trends of increased investor engagement and market depth.

Investors looking for opportunities in India’s financial markets may find value in monitoring these dynamics and the companies Jefferies has singled out as potential outperformers in the current environment.