MUMBAI, June 27 (Reuters) – A rapid rise in derivative trading volumes in India could pose several challenges, a central bank report said on Thursday, adding to warnings of the financial stability risks that could emerge from a surge in retail participation in the country’s futures and options market.

Retail investors could be exposed to sudden movements in markets without proper risk management if they have large exposure to derivatives, the Reserve Bank of India said in the Financial Stability Report, which is a collective assessment of India’s Financial Stability and Development Council and includes contributions from all key regulators.