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The concentration of volumes in the top 100 stocks has declined in the current financial year over the previous year, with a larger number of stocks being traded as the bull market picks up steam.
The top 100 stocks accounted for 67.8 per cent of the cash market volumes on the BSE, and 82 per cent on the National Stock Exchange (NSE) in FY14. This has fallen in the current financial year to an average of 61.57 per cent on the BSE, and 74.07 per cent on the NSE; according to regulatory data.
The cash market involves buying and selling of the actual shares in the company, and not derivatives based on these shares.
The Securities and Exchange Board of India (Sebi)'s latest monthly bulletin record that an increasing number of shares have seen trading activity.
There were 5,498 stocks available for trading on the BSE, according to the Sebi data. Of this, 3,023 stocks were traded in October 2014 - the latest month for which data is available. In the same month last year, 2,621 stocks were traded.
The number of stocks eligible for trading on the NSE was 1,597, says the bulletin. A total of 1,555 stocks saw trading activity in October 2014, compared to 1,521 in October 2013.
Emails sent to the two exchanges did not receive a reply immediately.
The decline in concentration of the Top 100 stocks is still short of the FY13 figure of 60.6 per cent on the BSE, although it is marginally better than the 76.8 per cent on the NSE.
The pick-up in mid-cap and small-cap companies has also contributed to the lessening of the concentration numbers, according to Satish Menon, executive Director of Geojit BNP Paribas.
"There has been a rise in mid-cap and small -cap companies as investors have begun to come back to the segment. So this automatically means that volumes would not be as concentrated as they were before," he said.
There is also an increasing demand for information on smaller companies, said Pankaj Pandey, head of research at ICICIDirect.
"Once the market has turned positive, the amount of visibility in mid-cap and small-cap companies also increases. Activity may be restricted to the larger companies when sentiment is negative, but once that reverses, all participate," he said.
Menon added the majority of cash market volumes are still intra-day, which means that investors only take positions that are squared off within a single trading session. Since this requires a greater amount of liquidity, such activity is concentrated in the more liquid stocks; thus resulting in a situation where volumes chase more volumes. This changes as the market picks up.
Both the Sensex and midcap indices hit all-time highs in 2014, although the small-cap index is still off its highs.
