A gradual decline in the cash market volumes over the last two years notwithstanding, trading in the recent rally has turned specifically shallow.
While the benchmark indices are trading just 3-5% away from their life-time highs, the cash market activity, in terms of the traded quantity and the number of scrips, has, as such, failed to see a turnaround since early April this year.
Market observers point out that while there is a substantial interest in the front-line stocks, a lack of broader participation across all group of stocks has resulted in low market activity.
?Investor interest has gradually moved towards lesser number of stocks and this concentration may result in sharper pull-backs in case of a change in the market sentiment or a slowdown in FII flows,? said Jatin Dedhia, VP, institutional trading, Antique stock broking.
He said lack of follow-up trading in the midcap and smallcap counters depicts lower level of excitement in the market even as benchmark indices are trading at multi-month highs.
Exchange data show a sharp drop in daily number of stocks traded since April 2013. The five-day moving average of the combined number of scrips traded on BSE and NSE recently fell to 3,879, its lowest in over two years and almost 20% below the numbers traded in January.
Similarly, the five-day average cumulative trading quantity fell to 57 crore last week, almost half to its levels in early 2013.