Cash Segment Turnover Drops Below ₹1 Lakh Crore, Hits 15-Month Low:

Multiple factors are at play such as global shifts, significant drop across various economies, the rupee's depreciation and the constant selling by foreign investors have minimized trading activities for the month of February as both cash and derivative segments recorded an average daily turnover rate of upto 5 months low.

BSE and NSE data reveals the average daily turnover for cash markets has decreased to under rupees one lakh crores which has not been seen since November 2022. This also marks the eighth consecutive month of declining turnover on a month-on-monh basis.

Turnovers on options and futures have reached their lowest points in two years and February saw the average turnover for F&O drop to rupees one hundred eighty five point thirty nine lakh crores. This is also the fifth consecutive month of declining turnover on a month on month basis.

After witnessing a quick rise in volatility inducing activities, Indian equity market felt the presence of mut economic recession with a decline of almost three percent across the benchmark indices Nifty and Sensex. Further to this broader BSE indices representing mid cap and small cap dropped more than six and eight percent respectively.

According to experts Moneycontrol consulted, geopolitical issues and economic insecurity have caused investors to become risk averse and might result in a decline in equity trading. In addition, investors may begin to lean towards more fixed income securities due to the elevated interest rates, which could further reduce participation in the market.

“The drop highlights the growing concentration of pessimism and wariness among investors because of global economic woes (trade wars), increased market volatility - especially in the small and mid-cap segments - and risks of monetary tightening by central banks across the world,” said Aditya Kondawar, Complete Circle Capital’s Partner & Vice President.

As experts have noted, the steep decrease in the F&O segments stems from an increase in market volatility - which constrains opportunities to trade - as well as increasing risk aversion among traders. The recent changes by SEBI - lower number of weekly expiries, greater thresholds in capital for F&O trading, and increased taxation - have made the derivatives market less appealing, hence reducing speculative practices.

As Akshat Garg Choice Wealth's AVP noted, unless something like a drastic improvement to market conditions and investor sentiment occurs, the downward trend in both cash and F&O market volumes is likely in the short term.

According to Ajay Garg, the CEO at SMC Global Securities, the advance premium collection by options buyers from February is causing a stir among traders. Traders will eventually have to adapt to changing market conditions, and when the broader market calms down, the activity in F&O might surge, says Garg.