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The combined cash market turnover on the NSE and BSE shot up 60 per cent in May when election frenzy had gripped the market.
The average daily turnover last month was Rs 34,700 crore compared to Rs 21,900 crore during the initial four months of the year.
The surge in volume was on the back of consistent delivery-based trades, signalling the surge wasn't purely on the basis of speculative trading.
Delivery-based trade in May accounted for 43.54 per cent of total trade, slightly lower than the first four-month average of 46.2 per cent.
Sector players said despite the sharp rise in trading volumes, delivery volumes didn't drop. This suggests retail investors could have got active.
Since the beginning of the year, the number of delivery volumes has been on an uptrend as retail participants return to capitalise on the stock market rise.
Analysts said with inflation in a downtrend and markets touching highs since January, the real rate of returns has become positive, spurring retail investor interest in equities.
Ridham Desai, managing director, Morgan Stanley India, said, “As inflation goes down, real rates are likely to stay in the positive territory. So the first trigger for shift in asset allocation is going to be there. Households will see which asset class is going up and put money there.
“So I think you should see considerable flows from retail investment coming (into equities) after a re-jig from gold into other asset classes including equities.”
The gradual rise in trade volumes are pointing to this shift.
Market players said the victory of the Bharatiya Janta Party in the general elections and Narendra Modi's appointment as prime minister have fuelled optimism among retail investors, making a comeback to equities.
The sharp upmove in stocks in May, specially after the election results, has seen many dormant and inactive clients restart trading activity, claim brokers.
“We saw a large number of our existing clients returning to the market on May 16. The activity ratio on that day jumped up to almost 5 per cent,” said Santanu Syam, executive director – operations, Angel Broking.
Activity ratio is defined as the ratio of active investors to the total investor base. Post the 2008 equity market downturn, this ratio had fallen to as low as 2 per cent. Improving market sentiment since the beginning of this year has seen this number go up to about 4-5 per cent. However, this is still below the pre-2008 level of about 10 per cent.
