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Before going into a five-day break, traders and investors were seen paring positions, highlighting nervousness in the market.
Analysts said the Reserve Bank of India (RBI)’s decision to leave key policy rates unchanged and weakness in global markets had made participants wary of taking positions. As per data from exchanges, the overall equity market turnover on Wednesday was Rs 1.6 lakh crore, down 55 per cent compared to the daily average trading volume for the month of September. The average volume in September was Rs 3.6 lakh crore.
Market players said traders have trimmed positions ahead of the long weekend starting Thursday. The Indian market will resume trading on Tuesday.
“People generally reduce positions before going into a long break. Besides, markets have been in the oversold region in the last few days and indices have been more range-bound, indicating that there is some uncertainty in the market,” said Sunil Jain, vice-president (equity research), Nirmal Bang Securities.
Analysts said the drop in volumes was also an indication of the fatigue setting into the market, which has rallied sharply in the past one year.
The BSE Sensex had closed at 26,567, while the National Stock Exchange (NSE)’s Nifty closed below at 7,945 on Wednesday. The market had been directionless in the past week, plagued by worries of an interest rate hike in the US and rising geopolitical tensions in Hong Kong and Ukraine.
Domestically, the cancellation of coal blocks allotted between 1993 and 2008 by the Supreme Court and the RBI’s anti-inflationary stance caused jitters in the market.
Interestingly, equity trading volumes in September were highest this year. The surge in volume was on the back of increase in derivatives turnover, whose share in overall trading volumes rose to 93 per cent.
Some sections in the market believe large part of the derivative trading activity could have been on the shorter side. “Whenever there is a direction in the market - up or down — you see a lot of short-sellers in the market coming in. And the market is overdue for a correction because whatever expectation has been built into the market has been very high,” said Ambareesh Baliga, an independent financial analyst.
Nervousness in the market was evident as foreign institutional investor (FII) participation in the cash segment saw a drop in September. As per Securities and Exchanges Board of India data, FII net-inflows in September stood at Rs 5,449, the lowest since February this year. Domestic institutions were also net-sellers in September at Rs 1,136 crore as per data from the exchanges. “Both retail and institutions have stayed away from the market because of the volatility. When markets are in a range, investors prefer staying out until there is a fresh trigger in the market,” said Baliga.
