The Indian equity market clocked record average daily turnover (ADTV) in both the cash and derivatives segments in February amid a spike in volatility. The ADTV for the cash segment for both the exchanges combined came at Rs 1.27 trillion, while the same for the derivatives or the futures and options (F&O) segment stood at Rs 483 trillion in the previous month.
The volumes for both cash and derivatives have almost doubled from a year ago on the back of rising retail participation in the world’s fourth largest equity market. Underpinned by a sharp rally in stock prices, trading turnover has more than doubled over the past one year — providing a boost for players in the stock market ecosystem.
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In February 2023, the ADTV for the cash segment stood at Rs 53,800 crore while that for the F&O was at Rs 208 trillion. On a month-on-month (M-o-M) basis, ADTV rose 3.7 per cent and 5 per cent for the cash and derivatives segment, respectively.
The increase in volumes came even as stocks turned topsy-turvy as valuation concerns prompted investors to book profits in smallcap and public sector undertaking (PSU) space. Regulatory caution to mutual funds (MFs) investing in the smallcap space also weighed on sentiment. The Nifty Smallcap 100 and the Nifty Midcap 100 posted their first monthly loss after three months, even as the benchmark Sensex and the Nifty50 managed to eke out 1 per cent gain.
“Currently markets are trading at their all-time high levels and as we approach the general elections the volatility is expected to reach its peak. In the volatile markets, traders find more opportunities to enter and exit the trade. This would support trading volumes,” said Nilesh Sharma, Executive Director and President, Samco Securities.
Meanwhile, BSE managed to wrestle back some market share from the bigger rival NSE in the derivatives segment. After dipping to 12.5 per cent market share in January, the BSE surged back to 15.3 per cent in February.
“In the last month several trading members (brokers) were onboarded by the exchange for its derivatives segment. These were existing members but were not active in the BSE derivatives segment. This has helped in increasing turnover, new participation, and reach,” said one broker.
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BSE revived its derivatives segment only last year in May with the relaunch of Bankex and Sensex contracts.
The exchange, in the earnings call in early February, had said that it was working with foreign participants for institutional trades, engaging with more players in the ecosystem, and increasing co-location facilities for participants.
Last month, India’s market cap hit a fresh record high and even edged close to the Rs 400-trillion mark before finishing at Rs 388 trillion.
“Indian economy has continued to remain the fastest growing economy (Q3FY24 GDP @ 8.4 per cent) and has the potential to remain the fastest growing large economy for a considerably longer period of time. Even with this growth rate, it isn’t considered as costly as the market is expecting more room for growth following continuation of economic policies when the present government is expected to be voted back to power,” added Sharma.