Average daily cash volumes continue to dip; F&O segment hits new high

The average daily trading volumes (ADTV) for the cash segment stood at Rs 52,649 crore in March, nearly 10 per cent below past 12-month average. Meanwhile, the ADTV for the futures and options (F&O) segment hit a new high of Rs 236 trillion (notional turnover for the options segment)—more than 50 per cent higher than the 12-month average.

Markets remained volatile during the month amid the banking crisis in the developed world, boosting trading activity. For the past 12 months, cash turnover has seen a secular decline even as F&O volumes have seen robust growth. In FY22, the ADTV for the cash segment was Rs 72,153 crore, while that for the derivative segment was Rs 71 trillion. In FY23, cash ADTV fell to Rs 57,694 crore, while F&O more than doubled to Rs 155 trillion. Within the F&O pie, options trading is more dominant.

“Derivative volumes have seen a sustained increase in FY23. More and more investors are getting acquainted with options trading. A new investor typically starts with the cash market. But once they spend enough time in the market, they gravitate towards derivatives, particularly options,” said Tejas Khoday, co-founder and CEO of Fyers.

Starting April 1, the government has increased the securities transaction tax (STT) on sales of futures and option (F&O) contracts by 25 per cent. It remains to be seen how it alters the trading patterns. “There won't be much impact on trading due to the STT hike. The additional tax burden won't be big enough to dissuade trading," believes Prakarsh Gagdani, CEO at 5paisa Capital.

“STTs will not have any impact on trading volumes. Only the full-time professional traders will get impacted and they are not going to cut down on trading because of a higher tax. The tax hike is incremental,” added Khoday.