Trading volumes dip as Sebi's new margin collection norms take effect

Trading volumes on Tuesday were below the previous month’s average as the new upfront margin collection norms came into play. The cash market turnover stood at Rs 66,365 crore, against the daily average turnover of Rs 73,560 crore for November. The futures and options (F&O) volume stood at Rs 19 trillion, 40 per cent lower than last month’s average of Rs 32 trillion. 

While the dip was sharp when compared to the previous month’s average, the figure was, in fact, higher when compared to the start of the previous month.

Market players are expecting volumes to take a hit as traders will now have to furnish higher margins for trading. However, the real impact on volumes will be felt in the coming months as the margin rules are being implemented in a phased manner.

“Brokers who were giving very high leverages for intraday trading in cash and F&O will have to restrict these leverages to a maximum of four times of margin until February 2021, two times until May 2021, 1.33 times until August 2021, and 1 time from September 2021 on­wards. Effectively, if you require Rs 1.6 lakh as margin for one Nifty Future, a minimum of Rs 40,000, Rs 80,000, Rs 1.2 lakh and Rs 1.6 lakh will be required, respectively, until February 2021, May 2021, August 2021, and September 2021,” explained Vinay Punjabi, Head of Sales & Marketing, Ventura Securities.