Cash, F&O turnover growth dips to 4-year low

The aggregate turnover of cash and derivatives segments of stock exchanges increased by 12 per cent in the first half (April-September) of the current financial year, the lowest growth rate since the second half (October-March) of 2004-05. The low growth in turnover is partly owing to a decline in stock prices by around 39 per cent since January 8, 2008, and a drop of 18 per cent between April and September this year.

In the second half of FY05, bourses had reported a 13 per cent decline in the combined turnover despite a 16.3 per cent rise in the Sensex during the period. However, between April and September 2007 and between October 2007 and March 2008, the combined turnover of stock exchanges increased by more than 50 per cent.

The National Stock Exchange (NSE) ruled the roost, accounting for 92 per cent of the total turnover on cash and derivatives segments. The aggregate turnover of NSE on both cash and futures and options (F&O) increased by 14 per cent in the first half of FY09, with F&O volumes increasing by 13 per cent and turnover on the cash segment posting a 21 per cent rise.

Asia's oldest bourse Bombay Stock Exchange (BSE), which has a share of 8 per cent in the total market turnover, saw its volumes dipping by 6 per cent in the first of FY09, registering a decline for the first time since April-September 2005. The cash market generated 98 per cent of the bourse's total turnover, while its F&O segment accounted for 2 per cent of the volumes. NSE's F&O segment accounted for 79 per cent of its trading volumes, while its cash segment contributed the remaining 21 per cent to its turnover.

Overall, the F&O segment has remained the prime driver of volumes, with its share in the total turnover hovering around 72 per cent in the last two years. In 2001-02, the derivatives' share in the total turnover was 10 per cent, which increased to 32 per cent in 2002-03, rose to 57 per cent in 2003-04 and jumped to 61 per cent in 2004-05.

The large-cap, A-group stocks attracted more buyers in the bear phase. No wonder, the share of large-cap stocks in the total turnover increased from 75 per cent in the first half of FY08 to almost 87 per cent in the corresponding period of FY09. The top 10 large-cap stocks made up 29 per cent of the total cash market turnover.