 "Markets 2013: Retail exodus from stocks continues")
Total trading volumes in the cash segment of the top domestic stock exchanges, the BSE and the National Stock Exchange, in 2013 hit their lowest point in seven years, even as their benchmark indices clocked record highs during the year.
Average daily turnover in 2013 was Rs 13,303 crore, down 36.3 per cent since 2009, as the exodus of retail investors who have struggled to make returns from stocks in recent years got aggravated. Heightened volatility in stocks, amid uncertainty surrounding a weak currency, fear of tapering of the US central bank’s stimulus programme and poor economic growth prospects, drove away retail investors. As the benchmark Sensex (of the BSE) crossed the psychological 20,000 level a few times in 2013, investors felt it was a good time to trim their existing stock investments.
“Volumes in the cash segment have really come off as retail participation has dropped substantially. Retail customers clearly cannot live with the volatility. Even simple investing through mutual funds is not happening,” said Sudhakar Ramasubramanian, managing director, Aditya Birla Money.
In 2013, cash segment volumes dropped for a fifth straight year. In 2009, stocks worth a little more than Rs 20,000 crore changed hands every day. At the time of the financial crises in 2008, average daily cash market turnover was Rs 18,294 crore.
The lack-lustre performance of small and mid-cap stocks, in which retail investors are more active, has also affected volumes, according to Mayuresh Joshi, vice president and head (institutional sales), Angel Broking. “The index might be at 6,300, but mid and small-cap segment stocks have not yet reached their 2008 peak levels. Investors in these segments have been unable to book profits and get out,” he said.
Domestic institutional investors (DIIs) were net sellers in Indian equities, unloading stocks worth Rs 73,734 crore.
“Investors in the cash segment today comprise mainly a few large institutions and a handful of HNI (wealthy) clients. From a delivery point of view, it is only the foreign institutional investors (FIIs) who are buying, while DIIs have been selling. Only when DIIs start buying will there be some semblance of demand in the market,” said Ramasubramanian.
While volumes in the cash segment have declined by a fourth since 2007, volumes in the derivatives segment have gone up nearly four-fold during the period. Investors have flocked to the futures and options (F&O) segment due to its low margin requirements.
“The rise in the F&O segment has largely been led by the rise in the options segment, where transaction costs are far lower. Also, over five years, participation of the high-frequency algo traders has also gone up, pushing up the F&O segment volumes,” said Vikas Khemani, head of institutional equities, Edelweiss Securities.
F&O segment volumes in 2013 were Rs 1.81 lakh crore, up from Rs 48,838 crore in 2007.
Average daily turnover in 2013 was Rs 13,303 crore, down 36.3 per cent since 2009, as the exodus of retail investors who have struggled to make returns from stocks in recent years got aggravated. Heightened volatility in stocks, amid uncertainty surrounding a weak currency, fear of tapering of the US central bank’s stimulus programme and poor economic growth prospects, drove away retail investors. As the benchmark Sensex (of the BSE) crossed the psychological 20,000 level a few times in 2013, investors felt it was a good time to trim their existing stock investments.
“Volumes in the cash segment have really come off as retail participation has dropped substantially. Retail customers clearly cannot live with the volatility. Even simple investing through mutual funds is not happening,” said Sudhakar Ramasubramanian, managing director, Aditya Birla Money.
In 2013, cash segment volumes dropped for a fifth straight year. In 2009, stocks worth a little more than Rs 20,000 crore changed hands every day. At the time of the financial crises in 2008, average daily cash market turnover was Rs 18,294 crore.
The lack-lustre performance of small and mid-cap stocks, in which retail investors are more active, has also affected volumes, according to Mayuresh Joshi, vice president and head (institutional sales), Angel Broking. “The index might be at 6,300, but mid and small-cap segment stocks have not yet reached their 2008 peak levels. Investors in these segments have been unable to book profits and get out,” he said.
Domestic institutional investors (DIIs) were net sellers in Indian equities, unloading stocks worth Rs 73,734 crore.
“Investors in the cash segment today comprise mainly a few large institutions and a handful of HNI (wealthy) clients. From a delivery point of view, it is only the foreign institutional investors (FIIs) who are buying, while DIIs have been selling. Only when DIIs start buying will there be some semblance of demand in the market,” said Ramasubramanian.
While volumes in the cash segment have declined by a fourth since 2007, volumes in the derivatives segment have gone up nearly four-fold during the period. Investors have flocked to the futures and options (F&O) segment due to its low margin requirements.
“The rise in the F&O segment has largely been led by the rise in the options segment, where transaction costs are far lower. Also, over five years, participation of the high-frequency algo traders has also gone up, pushing up the F&O segment volumes,” said Vikas Khemani, head of institutional equities, Edelweiss Securities.
F&O segment volumes in 2013 were Rs 1.81 lakh crore, up from Rs 48,838 crore in 2007.