Cash market turnover dips to lowest in 28 months

The turnover in the cash segments of the country’s two premier stock exchanges has fallen to its lowest level in 28 months, indicating diminished interest among market participants. The combined average daily turnover in the cash segments of the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) stood at Rs 12,283.81 crore in this month till June 24, data compiled by the BS Research Bureau showed. This is the lowest combined daily average turnover in the cash segments of these two stock exchanges since February 2009, when it fell to Rs 10,724.38 crore.

Factors such as high inflation, rising interest rates, corporate governance and earnings slowdown have plagued Indian shares this year. The BSE benchmark Sensex has lost over 10 per cent in 2011 so far, making India one of the worst performing markets in the world.

“Hardly anyone is making money in this market,” said Ambareesh Baliga, chief operating officer at Way2Wealth Securities. “We have seen this trend of falling turnover for the last eight months. With the market moving in a narrow range, more and more people are now waiting on the sidelines,” he added.

The combined average daily turnover in the cash segments of NSE and BSE has fallen about 46 per cent since October 2010.

 In case of derivatives too, the average daily turnover is the lowest in 10 months. The average daily turnover in the derivatives segment has come down Rs 98,545.75 crore in this month from Rs 1,34,499.93 crore in October 2010. The last time the average daily turnover in the derivatives segment fell below Rs 1,00,000 crore was in August 2010, when it stood at Rs 93,351.40 crore.

Inflows from foreign institutional investors (FIIs), one of the dominant forces in the Indian market, have been tepid. After pumping in $29.36 billion (Rs 1,33,266 crore) in 2010, they have pulled out $162.70 million (Rs 908.40 crore) in this year so far.

“In a range-bound market, interest is bound to be less among traders as well as investors,” said Ajay Parmar, head of research – institutional equities at Emkay Global Financial Services.

One saving grace, however, is the delivery-based turnover as a percentage of overall turnover in the cash segment has remained relatively stable. The share of delivery-based turnover in the cash segment is 39.37 per cent this month, compared with 41.10 per cent in October 2010.