Equity volumes see strong growth in FY22 despite tightening of margin norms

Equity market volumes registered strong year-on-year (YoY) growth in the financial year 2021-22 (FY22) despite tightening of margin norms.

The equity cash market grew 9 per cent and derivative volumes jumped 2.6 times. “Higher growth of derivatives was accentuated by the introduction of margin norms during the year,” said Ansuman Deb and Ravin Kurwa, analysts at ICICI Securities, in a note.

The so-called peak margin norms got implemented in phases starting December 2020. Between December 2020 and February 2021, traders were supposed to maintain at least 25 per cent of the peak margin. This margin was raised to 50 per cent between March and May 2021. The same had been increased to 75 per until August. And finally to 100 per cent September 2021 onwards. Also from September, brokerage firms were disallowed from giving any additional intraday leverages for both equity and derivatives trading.

In March 2022, there was a 12 per cent gain month-on-month (MoM) in cash volumes, while options volumes declined by 4 per cent.

In the equity cash segment, the NSE’s average daily trading volume (ADTV) grew 13 per cent MoM in March 2022 to Rs 65,900 crore, while that of the BSE grew 5 per cent MoM to Rs 5,100 crore. In the options segment, the NSE’s ADTV volume declined 5 per cent on a MoM basis in March 2022 as India’s VIX declined 28 per cent.

The NSE’s equity derivatives ADTV in March 2022 came in at Rs 95 trillion (notional), down 5 per cent MoM, primarily driven by a decline in options volumes. On the other hand, the BSE’s options grew 3 per cent MoM to Rs 2.5 trillion in March 2022.

The NSE further tightened its grip on the leadership position. Its cash segment market shares improved from 91.2 per cent in June 2021 to 92.9 per cent in March 2022. While on the equity derivatives segment, its market shares improved from 93.8 per cent to 97.5 per cent during the same period. The NSE’s market share stood at 92.5 per cent in FY22 against 93.6 per cent in FY21.

The BSE, meanwhile, maintained its dominant market share in mutual fund trading. The number of orders processed on the BSE platform grew by 79 per cent to 19.6 million in March 2022, while the NSE platform registered a growth of 34 per cent to 3.2 million in the same period. The BSE commands an 86 per cent market share in terms of the number of orders processed and 67 per cent in terms of the value.

Among depositaries, CDSL’s accounts grew 4 per cent MoM to 63 million in March 2022. Its market share stood at 70 per cent in terms of total demat accounts as of March 2021 and 86 per cent in incremental accounts added in FY22.