Volumes dip, markets stay range-bound

Daily turnover down by a third in December compared to previous months

Trading volumes have slumped in December as markets have remained range bound in absence of any major trigger.

Turnover in both cash and derivative segment are down by 30 per cent compared to previous months. The benchmark BSE Sensex has moved more than one per cent on only two, out of previous 15, trading sessions. The index has declined 400 points, or 1.5 per cent during this period.

While the average daily turnover in the futures and options (F&O) segment has fallen by 30 per cent to Rs 3.12 lakh crore, the turnover of cash markets is down 28 per cent to Rs 18,568 crore, shows data compiled by Business Standard .

 

Market participants say the decline in the volumes is largely on account of the absence of any big trigger. Between September and November, trading activity as seen an uptick of 20 per cent over the previous months. This was on the back of an increase in market volatility due to uncertainty over events like US Presidential election, US FOMC meeting and the surprise demonetisation announcement.

"In the past few sessions, we have seen a directional vacuum. Investors aren't sure about the exact impact of demonetisation. Further, there has been no major trigger even on the global front. Investors are in a 'wait and watch' mode. This is the reason why the price movement in various stocks is also limited," said Pankaj Pandey, head of research, ICICI Direct.

Some markets participants also believe that the volatility that prevailed in the last three months has driven off volumes, especially from the non-institutional side. "Retail and high net worth clients are shying away from market participation due to the volatility that markets witnessed in the recent time. Their participation has dropped by 20-25 per cent in the last few days," said B Gopkumar, CEO, broking and distribution, Reliance Capital.

Experts also say December is also a relatively tepid month for markets, especially the last two weeks, as a majority of overseas investors go on vacation during this time. As foreign institutional investors (FIIs) are big participants, their absence dents the volumes.

"In the last three months, there was a lot of activity in the markets due to FIIs. In fact, all the emerging markets had witnessed a bout of selling by FIIs during the period which had pumped up the turnover in the markets," Pandey added.

Market participants see the volumes being subtle till mid-January due to lack of any major triggers. Volumes could once again pick up once December quarter earnings are underway and during the run-up to the Budget.

"Markets currently lack big triggers. Until October this year, we were seeing positive consumption trends along with good monsoon and payout of 7th pay commission. I think markets will remain range-bound until the union budget. A positive announcement in the budget regarding direct and indirect tax benefits, increased spending in agriculture or infrastructure sectors, would be seen positively by the markets," said Vaibhav Agrawal, head of research, Angel Broking.