At a time when the Indian capital market is set to see the emergence of a third national-level bourse, trading turnover in the cash segment has fallen to a five-year low. Volatile market conditions and thinning retail investor participation due to bearish sentiments have taken a toll on market volumes.
The average daily turnover on both the stock exchanges stood at Rs 13,850 crore in the first half (H1) of this calendar year, the lowest since 2007. Cash market turnover in H1 is down eight per cent compared to the same period last year - a fourth straight year of decline. This, despite the market rallying more than 20 per cent at the start of the year and foreign institutional investors pouring in more than $10 billion into the Indian market.
“Sentiment has been the worst-ever this year. Retail participation was hardly there. Mutual fund participation was restricted due to weak inflows. Foreign investors have been in the risk-off mode. All these have taken a toll on the domestic market turnover,” said Sudip Bandyopadhyay, managing director and chief executive officer of Destimoney Securities.
| FALLING INTEREST The combined average daily turnover in the cash segment was at | |||
| Avg daily cash turnover (in Rs cr) |
Market share (%) | ||
| BSE | NSE | ||
| H1-2007 | 13,199 | 33 | 67 |
| H1-2008 | 20,768 | 30 | 70 |
| H1-2009 | 19,018 | 25 | 75 |
| H1-2010 | 18,438 | 25 | 75 |
| H1-2011 | 15,059 | 21 | 79 |
| H1-2012 | 13,845 | 18 | 82 |
| Source: BSE, NSE; Data compiled by BS Research Bureau | |||
Added Ambareesh Baliga, chief operating officer, Way2Wealth, “Volume in the cash segment is a function of market performance. In the cash segment, people have to buy and then sell to make money, it can’t be the other way round. The sentiment has not been very conducive for people to buy.”
In the cash segment, during the first half of the year, the National Stock Exchange (NSE) had a market share of about 82 per cent, while the share of Bombay Stock Exchange (BSE) dropped below 20 per cent for the first time.
The question on everybody’s mind is whether the launch of MCX-SX would help increase the turnover pie or whether it will eat into the share of the two existing players.
“It’s is not a zero sum game. We (MCX-SX, NSE and BSE) will try to complement each other. We believe the market will grow multi-fold in the next five years and everyone will benefit from that,” said Jignesh Shah, vice-chairman, MCX-SX.
The market, however, seems to be divided on whether the arrival of a third exchange would increase the turnover pie.
“The equities segment already has two players, one of it is very aggressive. I think there will be cannibalisation unless market sentiment improves significantly,” said Baliga. He added that MCX has proved to be a game-changer in the currency and commodity segments and it remains to be seen whether they will be able to replicate the same success in equities.
Bandyopadhyay added, “The launch of the new exchange will help in growing the turnover pie in the long run. Competition will spur product innovation, which will result in improvement in turnover.”
