Gold Duty Hike: Zerodha's Nithin Kamath on Rareness of Insider Trading Ahead of Economic Policy Changes

India's Bullion Markets Show Discipline Amidst Government's Surprise Import Duty Hike

The Indian government's decision to raise import duties on gold and silver to 15% has triggered a sharp reaction in bullion markets. However, a closer look at the market's behavior suggests that Indian markets have remained surprisingly disciplined, with no unusual movements in open interest, prices or trading volumes in the hours leading up to the announcement.

A Positive Sign for Indian Markets

According to Zerodha co-founder Nithin Kamath, this observation reflects positively on Indian markets at a time when concerns around insider trading and privileged access to policy decisions have become increasingly common globally. Kamath pointed out that the news about import duties on gold and silver going up to 15% came late last night, with no unusual movements in open interest, prices, or volume in Gold and Silver contracts.

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A Contrast to Western Markets

The Indian government increased the effective import duty on gold and silver to 15%, reversing some of the reductions announced in 2024. The move came amid concerns over rising bullion imports, pressure on the current account deficit, and weakness in the rupee. The announcement immediately pushed domestic bullion prices sharply higher, with MCX gold and silver contracts witnessing strong gains after trading resumed.

A Lesson from the US

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Kamath compared India's market conduct with that of the US, suggesting that if a similar policy decision had been taken in the US, there would likely have been attempts by individuals with access to privileged information to profit from the development through futures markets, derivatives, or even prediction market platforms.

Regulatory Oversight in India

Kamath also referred to previous allegations and reports surrounding trading activity linked to crude oil and geopolitical conflicts, particularly during the Iran conflict. He suggested that the monetization of privileged information by influential circles had become increasingly normalized in some parts of the world. However, he argued that India's financial ecosystem appeared to remain more tightly supervised in these "grey zone" areas compared to many developed markets.

A Broader Debate on Prediction Markets

Kamath's comments have reignited a broader debate around prediction markets and alternative trading platforms, which have rapidly gained popularity globally over the last few years. Platforms such as Polymarket and Kalshi have increasingly become avenues where users speculate on political outcomes, policy shifts, and geopolitical events, often raising questions around information asymmetry and regulatory oversight.