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Nithin Kamath of Zerodha sounds alarm on options market, says real hedging is getting harder

India's options market has transitioned to favor weekly contracts, which now dominate open interest. According to Zerodha's Nithin Kamath, this trend poses difficulties for long-term hedging, as liquidity in longer-dated options shrinks, particularly evident during market stress.

Mar 12, 2026 &03521212202631; 04:52 UTC www.livemint.com

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Negative for markets

Sentiment score: -65/100

Moderate impact Medium-term (weeks)

WHAT THIS MEANS

Nithin Kamath warns that India's options market shift toward weekly contracts is reducing liquidity in longer-dated options, making genuine hedging strategies increasingly difficult to execute, particularly during market volatility. This structural change in the derivatives market could impact institutional investors and risk management practices.

AI CONFIDENCE

75% High

SENTIMENT GAUGE

NEWS POWER SCORE

AFFECTED ASSETS

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NIFTY50

NIFTY50Index

High volatility expected

Options market structural shift reduces hedging effectiveness during stress periods

⇅

SENSEX

SENSEXIndex

High volatility expected

Liquidity concentration in weekly options increases tail risk for long-term investors

⇅

IT→.MI

IT→.MIStock

High volatility expected

Indian financial sector exposed to derivatives market structural risks

PRICE HISTORY

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⚡ SUGGESTED ACTION

Institutional investors should consider alternative hedging instruments (futures, OTC derivatives) and reassess portfolio protection strategies. Monitor for potential volatility spikes when weekly options expire and longer-dated liquidity dries up during market corrections.

KEY SIGNALS

Shift from monthly/quarterly to weekly options dominanceDeclining liquidity in longer-dated derivativesIncreased hedging costs and execution difficultyPotential systemic risk during market stress eventsInstitutional investor vulnerability to liquidity crunch

SECTORS INVOLVED

Financial ServicesDerivatives & Options TradingRisk Management

Analysis generated on Mar 12, 2026 at 04:58 UTC

Disclaimer: This analysis is generated by artificial intelligence for informational purposes only and does not constitute financial advice, investment recommendation, or solicitation. Original reporting by Livemint. Always conduct your own research and consult a qualified financial advisor before making investment decisions.

Nithin Kamath of Zerodha sounds alarm on options market, says real hedging is getting harder

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