Cash market volumes hit a high as intra-day trades surge

May 6, 2020 2:20 AM

The surge came at a time when the Nifty and Sensex gained 14.4% and 14.6%, respectively. Market experts say this could have been driven by intra-day trading.

Cash market volumes for April crossed the Rs 50,000-crore monthly average mark on the NSE, the highest in a year.Cash market volumes for April crossed the Rs 50,000-crore monthly average mark on the NSE, the highest in a year.

By Urvashi Valecha

Cash market volumes for April crossed the Rs 50,000-crore monthly average mark on the NSE, the highest in a year. The surge came at a time when the Nifty and Sensex gained 14.4% and 14.6%, respectively. Market experts say this could have been driven by intra-day trading.

According to data on the NSE, the cash market volumes for April stood at `50,322 crore against the one-year average of Rs 37,661 crore. The futures and options (F&O) segment’s volumes for the month were Rs 11.4 lakh crore against the one-year average of Rs 13.96 lakh crore. In March as well, when the stock markets hit rock bottom, the cash market volumes stood at Rs 47,917 crore, which is higher than the one-year average.

The cash market volumes started rising after the Securities and Exchange Board of India (Sebi) in March introduced volatility curbs by imposing temporary restrictions on short selling, increasing margin requirements and hiking penalties for violators. This implies that some traders and speculators could have shifted from the F&O market to the cash market to continue their trading activities. Rajesh Palviya, head – technical and derivatives, Axis Securities, said, “In March, Sebi introduced a hike on margin derivatives which could have caused a shift of some players to do intra-day trading using the cash market, rather than taking the end-to-end pressure of F&O trading.”

The delivery percentage stood at 33.8%, which is in line with the average ruling out any increase in long-term buying by institutional investors. Interestingly in April, both foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) sold equities worth $30 million and $108.5 million, respectively.

Palviya further pointed out the retail segment and high net worth individuals (HNIs) could have been the reason for the surge in cash market volumes. This, he said, could be witnessed through the movements in the mid-cap stocks in April which are dominated by retail and HNIs investors.

Market participation tends to increase when markets are rallying but heightened uncertainty and volatility can also cause cash volumes to soar which traders use to their benefit. Given that the economic impact of the lockdown cannot be gauged, the uncertainty in the market will continue to persist even in May. Shrikant Chouhan, executive vice-president – equity technical research, Kotak Securities, said, “Going on the basis of data and technicals, May is likely to witness a steep decline in Nifty, and so, the heightened uncertainty could mean that players may not want to make risky bets. This could mean a rise in cash market volumes.”

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