 "Trading volumes surge amid broader mkt buoyancy in Aug; F&O hits fresh high")
The average daily turnover (ADTV) for the equities cash market segment hit a 22-month high, while the futures and options (F&O) segment continued to set new records, buoyed by the overall positive market conditions.
The ADTV for the cash segment stood at Rs 83,446 crore (National Stock Exchange, or NSE, and BSE combined), marking the highest level since October 2021.
Meanwhile, the ADTV for the F&O segment reached Rs 314 trillion. BSE also made significant market-share gains in both the cash and derivatives segments, with its relaunched Sensex and Bankex derivatives gaining further acceptance among traders.
Despite a 2.3 per cent decline in benchmark indices last month, the market breadth remained positive.
On the BSE, 2,126 stocks advanced while 1,955 declined in August, resulting in an advance/decline ratio (ADR) of 1.1.
Additionally, the small- and mid-cap indices logged strong gains for the fifth consecutive month. Trading volumes received a boost from large share sales exceeding Rs 60,000 crore by promoters and private equity players.
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Trading activity flourishes when the underlying market conditions are robust. The ADR for the domestic market has remained above 1 since April, reflecting the outperformance of the broader market. Market experts noted that despite the August decline in indices, sentiment remained positive, bolstering traders’ risk appetite.
Prakash Gagdani, whole-time director and chief business officer of 5Paisa, observed, “Many mid-cap stocks are reaching all-time highs with significant trading volumes. This is one of the reasons why the cash market is reaching all-time highs.”
Chokkalingam G, founder of Equinomics Research & Advisory, pointed out that millions of new investors are entering the market every week.
“The small- and mid-cap segments have outperformed the indices threefold. Such significant outperformance is rare. When small-caps outperform the Sensex, retail participation in cash trading increases. Furthermore, retail participation in the derivatives market has also recently increased,” he said.
The relaunch of BSE’s Sensex and Bankex derivatives contracts has played a role in expanding turnover for the F&O segment. BSE’s ADTV for the derivatives segment surged 2.4x, rising from Rs 4.3 trillion in July to Rs 10.5 trillion in August. This improvement also led to an increase in market share from 1.4 per cent to 3.4 per cent.
In the cash segment, BSE’s market share rose from 6 per cent to 8.24 per cent, marking its highest level in nearly a year. Its cash segment ADTV of Rs 6,878 crore was the highest in nearly 30 months.
To attract investors, BSE reduced lot sizes and shifted the expiry cycle to Friday. Encouraged by the positive response, BSE has now decided to move the expiry for its Bankex contracts to Monday. As a result, derivative contracts will now expire on all five weekdays, starting with BSE Bankex on Monday (effective from October), NSE’s Nifty Financial Services (FinNifty) F&O contracts on Tuesday, Nifty Bank on Wednesday, Nifty on Thursday, and the Sensex on Friday. Exchanges expect that spreading out derivatives expiry across the week will boost trading activity.
Gagdani commented, “Sensex maintains a Friday expiry, a day after Nifty’s expiry on Thursday. This allows people to hedge between Nifty and Sensex. BSE’s lot size is smaller; hence, the value is lower than that of Nifty derivatives. Derivative volumes have been rising even during challenging market phases.”
Amid these market-share gains, shares of BSE have been on a tear. The stock has gained nearly 40 per cent in the past month and has surged 2.5x this financial year (2023-24).