Cash market turnover jumps to six-month best

Written by fe Bureau | Mumbai | Updated: Sep 29 2012, 08:14am hrs
Stock-market turnover has jumped to a six-month high as a combination of domestic and global factors lead to a revival in investor interest. Market players attribute this trend to the reform process initiated by the government that has attracted huge amount of foreign money into the Indian capital market.

The current month has seen a combined daily average turnover of R14,150 crore on the Bombay Stock Exchange and the National Stock Exchange (NSE). This is the highest figure since March when the average turnover was pegged at R15,236 crore. Incidentally, the last four months saw the turnover dip below the R12,000-crore mark.

Market participants say that investor sentiment which remained subdued till a couple of weeks back received a shot in the arm when the government initiated its much-awaited reform process.

There was a sea change in interest in India post QE3 and the FDI reforms announced in India. Clients sensed a change in the political environment in India and some investors who were earlier staying away were keen to meet and understand the shape of things to come, said a note by Jyotivardhan Jaipuria of Bank of America Merrill Lynch.

Early this month, the government gave the go-ahead for foreign direct investment in aviation and multi-brand retail. It also raised diesel prices for the first time since June 2011. Meanwhile, the US Federal Reserve announced its third round of quantitative easing (QE3) that involves monthly purchases of $40 billion worth of mortgage-backed securities.

Meanwhile, a section of market players attributed the rise in turnover to the surge in stock prices witnessed in the last couple of weeks. They said that one needed to wait and watch for some time before concluding that the sentiment had revived significantly.

It is just two weeks since the reforms were announced and there was bound to be a knee-jerk reaction, said the head of a large domestic brokerage. News about the Indian reform process came along with the QE3 announcement and, so, markets globally took a turn. We need to wait for changes in the macro fundamental factors, he said, wishing not to be named.

The rise in the cash segment turnover has seen a corresponding rise in the derivatives segment volumes, too.

On the NSE, the daily average F&O volume was pegged at R1.32 lakh crore in September, which is the highest since March.

The BSE derivatives segment, however, has taken a hit in the current month.