What will be the impact of physical delivery of stock derivatives?

By forcing physical settlement, the distinctions between cash segment and F&O are being reduced

The Sebi's decision to make physical delivery of stock derivatives mandatory will have multiple knock-on effects across cash and derivatives segments. Many of those consequences would be negative. 

India has an extremely active stock futures market, and a less-active but still-liquid stock options market, with all contracts cash-settled. High liquidity enables efficient price-discovery and leads to tight spreads between bids and asks.

This is beneficial to investors and hedgers. More derivative volumes also leads to more liquidity in the cash segment. The underlying stock has tighter spreads and it can be traded at a lower impact cost. (Impact cost is