The markets traded at an average of Rs 25, 149.72 crore during May 2014. The average daily turnover surged nearly 20% in August compared to Rs 19,727.27 crore in July. (Reuters)
Stock exchanges appeared to have benefited from the rout in the markets, with the average daily turnover in the cash segment of both the BSE and the NSE soaring to Rs 23,512.09 crore in August. With more volatility expected in the days to come, market participants expect further surge in daily turnover.
Before August, Indian markets had seen such a huge turnover in May 2014, when the NDA government came to power with a clear majority. The markets traded at an average of Rs 25, 149.72 crore during May 2014. The average daily turnover surged nearly 20% in August compared to Rs 19,727.27 crore in July and was over 9% higher than the average turnover during FY15-16 , stock exchanges data showed.
The market turnover also witnessed a brief surge during April and May when foreign portfolio investors (FPIs) pulled out from the markets amid concerns over a possible default by Greece.
“The stock exchange turnover goes up whenever there is volatility in the markets. Hence, it was expected,” said Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services, adding that increase in turnover wouldn’t essentially mean that sellers are making more money through trade.
The NSE VIX — a measure of market expectation of near-term volatility — climbed 52.1% during August, indicating the highly volatile sentiment in Indian markets. The trend was visible in the derivatives segment as well. The total turnover in the derivatives markets on both the exchanges during August was Rs 6,74,20,891 crore — up nearly 55% from Rs 4,33,85,483 crore in July.
Increase in speculative trading is one of the most important reasons behind the surge in trade volumes, experts told FE.
“There are a lot of day traders and arbitrages who try to amplify the volumes to make profits. Whenever the markets are volatile and traders know that a particular sector — like FPIs — is going to offload stocks in large numbers, a lot of arbitrage and speculative traders sell their shares along with them to let the shares fall to such a low level that they can buy them back and make good margins,” said UR Bhat, managing director, Dalton Capital Advisors.
Benchmark indices tanked nearly 6% on August 24, the worst session in last seven years. Since then, the markets have been shaky. FPIs have pulled out more than $2.5 billion during August, making it the worst month since October 2008.
Numerous brokerages, including Bank of America Merrill Lynch, Macquarie and CLSA, have trimmed their Sensex and Nifty targets in the last one week, citing poor market forecast and the crisis in China.
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