India’s NIFTY50 futures market has grown significantly calmer between 2022 and 2025 — but such calm may be masking emerging vulnerabilities rather than signalling genuine stability. At the same time, India’s secondary market for non-performing loans (NPLs) remains structurally underdeveloped, with design inefficiencies that suppress transaction volumes, distort price discovery, and slow capital recycling within the banking system.
These concerns emerged from two research studies released at the 16th Annual Finance Conference hosted by the Centre for Finance & Economics Research (CFER) at Great Lakes Institute of Management, Chennai, themed “Financial Stability in a Volatile World: Risks, Resilience & Regulation.” The conference brought together regulators, economists, and market practitioners to examine evolving risks in India’s financial system.
Speaking at the event, Professor Debashis Sanyal, Director, Great Lakes Institute of Management, said: “Financial stability demands continuous research, regulatory vigilance, and institutional resilience. Platforms like this conference allow us to examine risks with intellectual honesty and policy relevance,”.
The ‘Quiet-Risk’ Warning: Calm Markets Are Not Necessarily Safe Markets
In India’s most actively traded derivatives contract, a different shift is underway. Trading in Nifty 50 futures has entered an unusually calm phase. High-frequency trading noise has declined significantly since 2022, giving rise to smoother price movements and a more persistent liquidity regime. The second study, “
“Market Microstructure Metamorphosis: The Structural Reduction of High-Frequency Noise in Nifty 50 Futures”, authored by Professors Ranjan Chakravarty, Vishwanathan Iyer, Vivek Nagarajan, and Sandeep Srivathsan, analyses millions of tick-by-tick data points from the Nifty 50 futures market between 2022 and 2025. The study documents a decisive shift: markets moved from a noisy, high-frequency trading environment in 2022–23 to an unusually calm and persistent liquidity regime by 2025, driven in part by SEBI’s regulatory interventions.
However, the researchers introduce a cautionary concept they call Quiet-Risk – the finding that reduced noise does not automatically mean stronger resilience and regulators should not mistake low volatility for low vulnerability.
Delivering the inaugural keynote address, Dharmakirti Joshi, Chief Economist, Crisil noted: “Not only did India perform better than expected in 2025, but the global economy also exceeded expectations. This was largely due to the softening impact of tariffs through exemptions, frontloading of shipments to the US, diversification into other markets and growth in services exports, which are not subject to tariffs”
He added: “India’s impressive performance was supported by accommodative monetary and fiscal policies, a favourable above-normal monsoon and lower crude oil prices. With an anticipated growth rate of 6.7% in 2026-27, India is set to maintain its status as the fastest-growing large economy.” However, he cautioned that heightened uncertainty, elevated public debt, which creates fiscal vulnerabilities and geopolitical risks continue to pose challenges capital flows and currency stability”.
India’s Distressed Debt Market: Reform Without Depth
Despite India’s strengthened insolvency resolution framework, its secondary market for non-performing loans (NPLs) remains strikingly underdeveloped. The study ‘Cherries, Lemons and the Market for Non-Performing Loan’, authored by Prof Rajesh Kumar Acha, highlights: “buyers cannot easily distinguish between recoverable and unrecoverable assets, leading to a ‘lemons’ problem that depresses prices and discourages participation. The paper proposes that banks offer to sell larger fractions of their NPL portfolios rather than cherry-picked slices, thereby reducing information gaps and improving price discovery. It also calls for regulatory measures to deepen the market and attract a wider pool of investors.”
Professor Vidya Mahambare, Union Bank Chair Professor of Economics and Chairperson of CFER, said: “Volatility is no longer episodic; it is structural. The real question is how markets, institutions, and regulators adapt without stifling growth. India’s financial markets do not operate in isolation – they are deeply intertwined with the real economy at home and with capital flows, commodity cycles, and policy signals from abroad. When global fragmentation disrupts trade corridors and tightens dollar liquidity.”
