Despite the recent uptick, the broader trend in India’s exchange-traded currency derivatives market remains one of contraction.  | Photo Credit: PRIMEIMAGES

Trading activity in India’s exchange-traded currency derivatives market has shown signs of revival in recent months, with the National Stock Exchange (NSE) witnessing a sharp jump in volumes and turnover after the escalation of the US-Iran conflict towards the end of February 2026.

NSE’s monthly currency derivatives volume rose from 79 lakh contracts in February 2026 to 1.36 crore contracts in March, a jump of over 71 per cent. Activity remained elevated thereafter, with volumes at 1.01 crore contracts in April and climbing further to 1.30 crore contracts in May 2026. The surge reflects increased hedging and speculative activity amid heightened uncertainty in global currency markets.

NSE volumes and turnover rebound sharply

The value of turnover too increased in sync. NSE’s currency derivatives turnover increased from ₹0.72 lakh crore in February 2026 to ₹1.26 lakh crore in March, before easing to ₹0.95 lakh crore in April and rebounding to ₹1.25 lakh crore in May. According to Madan Sabnavis, chief economist at Bank of Baroda, “the rise in volume as well as turnover of NSE traded currency derivatives, following the US-Iran conflict, is due to the rupee touching historic lows against the dollar. At one point it was almost ₹97 against a dollar, and there was a lot of speculation, about the rupee touching 100. This might have fuelled some hedging or speculative trading.”

NSE’s dominance of the segment has also strengthened dramatically. Its share of total exchange-traded currency derivatives turnover increased from 93.6 per cent in FY25 to 99.5 per cent in FY26. In FY27 so far, NSE accounts for the entire market turnover. This follows the near-complete halt in trading on competing platforms, with currency derivatives trading on BSE effectively ending in April 2025 and on MSE in August 2025.

“Derivatives markets tend to be natural monopolies, in so far as there is first mover advantage, and anyone with the bigger share in the market tend to saturate it further. This is the case here with NSE as well”, explained Sabnavis.

Annual volumes continually shrink before recent recovery

Despite the recent uptick, the broader trend in India’s exchange-traded currency derivatives market remains one of contraction. Total annual volumes across exchanges fell from 205 crore contracts in FY23 to 116 crore contracts in FY24, representing a 43.2 per cent decline.

The slump deepened in FY25, when total traded contracts collapsed to 17.3 crore, an 85.2 per cent year-on-year drop. Volumes declined further to 9.9 crore contracts in FY26, marking another 42.7 per cent fall from the previous year.

Anindya Banerjee, head of research, Kotak Securities, explains, “RBI circular in April 2024 effectively barred retail participation, bringing down the volumes drastically.”

According to Sabnavis, “the fall in volumes in FY25 or FY26, might be explained by higher trading in NDF (non-deliverable forward) as it allows investors to hedge or speculate on currencies such as the rupee with the settlement in a freely convertible currency like the dollar”.

 (Deepac Nishanth is an intern)

Published on June 15, 2026