Cash turnover soft, derivatives volumes jump in Aug amid rising volatility

Equities turnover muted for 2nd month; F&O posts double-digit rise in August

Cash market volumes stayed subdued for a second straight month amid a broad-based market decline, while derivatives turnover posted double-digit growth in August on the back of rising volatility.

 

The combined average daily trading volume (ADTV) for the cash segment across the National Stock Exchange (NSE) and BSE stood at ₹1.03 trillion, a modest 0.5 per cent increase month-on-month. This followed a sharper 16 per cent drop in July.

 

Experts link the softness to back-to-back declines in key indices. The Sensex slipped 1.7 per cent and the Nifty 1.4 per cent in August, while the Nifty Midcap 100 and Nifty Smallcap 100 fell 2.9 per cent and 4.1 per cent, respectively. Losses had been steeper in July, when the Sensex and Nifty each dropped 2.9 per cent, the Nifty Midcap 100 slid 3.9 per cent, and the Nifty Smallcap 100 tumbled 5.8 per cent.

 

“Cash and delivery volumes depend heavily on market performance. With back-to-back declines, cash market volume is likely to remain range-bound, as market direction is unclear due to tariff concerns. Any reduction in tariffs could revive sentiment,” said Prakarsh Gagdani, chief executive officer of Torus Financial Markets.

 

In contrast, derivatives activity surged. ADTV for futures and options (F&O) jumped 11.3 per cent to ₹414.61 trillion, the highest level since November 2024. 

 

“Markets were both volatile and range-bound last month — conditions where derivatives traders thrive. Higher volatility drives up derivatives strike prices, creating opportunities for quick profits,” noted Kranthi Bathini, director of equity strategy at WealthMills Securities.

 

F&O turnover has rebounded 44 per cent from February’s ₹288 trillion but remains 23 per cent below the September 2024 peak of ₹537 trillion, when markets touched record highs. Analysts credit the gap largely to regulatory changes, including capping weekly expiries at two days and discontinuing weekly contracts on non-benchmark indices.

 

The market-share battle between exchanges heated up in August. BSE outpaced NSE in derivatives growth, with its F&O ADTV rising 24 per cent to ₹178 trillion, against NSE’s 3.3 per cent rise to ₹237 trillion.

 

Both exchanges will swap expiry days for their weekly derivatives contracts starting this week. NSE’s weekly Nifty contracts will now expire on Tuesdays instead of Thursdays, while BSE’s Sensex contracts will move to Thursdays from Tuesdays. The impact of these changes on market share remains to be seen.

 

Market players said there could be some shift in market share, but the expiry-day swap won’t affect the overall volume pie. “Derivatives trading revolves around opportunities on the options side, which depend more on volatility than on expiry dates. As long as opportunities exist, expiry timing, or even the shift from weekly to monthly contracts, won’t matter,” said Gagdani.