29% drop year on year in average cash market volumes at 23,700 crore
@nithin how do you think will volumes come back? Is it only a temporary blip due to negative markets or is there something to worry and fix structurally to improve the cash market volumes
Markets plateauing has led to fewer active participants in the market, which shows up in the lower turnover. But if you compared the options turnover, which has only gone up, the same logic wouldn’t add up.
Most volumes in the markets come from active traders, so people trading intraday equity or trading F&O. Since the markets haven’t been as bullish as before, the number of new entrants in the markets who typically trade intraday stocks has reduced. Also, starting September 2021, there has been a restriction on the maximum intraday leverage brokers can offer for trading equity. On average, the industry was offering 20 times, and it got reduced to 5 times. This reduction in leverage hurt equity volumes and also futures trading volumes.
Most equity intraday and futures traders have slowly moved to trade options, as options give that additional leverage that traders generally seek—higher risk but higher potential reward.
For equity volumes to pick up again, I guess the markets must be much more bullish. Also, the industry must popularize other products, maybe stock lending and borrowing. Hopefully, we will be able to do something about this by the end of the year.