The average daily turnover in the equity cash segment has declined for fourth consecutive month in October, falling from the high of Rs 1.64 lakh crore in June to Rs 1.14 lakh crore this month.
The decline is more pronounced in October, with volumes hitting the lowest levels in seven months as the sentiment has been marred by a slew of factors, including consistent selling by foreign portfolio investors (FPIs) and weak earnings.
Data from the National Stock Exchange (NSE) and BSE show a 12% decline in the average daily turnover in the cash market this month. This coincides with a 5% decline in benchmark indices and a nearly 7% drop in the broader market indices.
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“Whenever there is euphoria in smallcap and midcap stocks, volumes tend to be high. Secondly, if FPIs are active on sell side, domestic traders reduce their trading volume. There are the reasons why volumes have fallen,” said Deepak Jasani, head of retail research at HDFC Securities.
FPIs have net sold $9.8 billion (Rs 82,391 crore) worth of shares in October, almost undoing the entire net buying seen in the first half of FY25.
“It is mainly because of various uncertainties with regard to the US elections, interest rate scenario and China stimulus measures,” said Shrikant Chouhan, executive VP and head of equity research at Kotak Securities.
Apart from these global factors, slowing domestic earnings and consumption growth and high valuation of equities have fuelled uncertainty among investors, leading to a decline in volumes, experts said.
While FPIs have been aggressive sellers this month, domestic institutional investors have come to the aid by buying shares worth Rs 97,091 crore.
The average monthly turnover in the cash market in FY25 has been Rs 1.33 lakh crore, with a sharp surge during the general elections in June.
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While the market witnessed a relief rally in the past two sessions, participants are divided on whether the recovery will sustain or the correction will deepen.
Chouhan said the pullback should be sizeable. “Nifty can go even till 25,500 points some time in November,” he said.
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