look news india
Ahmedabad: Cash trading in equities in the stock market declined for the second consecutive month in August, reflecting investor concerns. In contrast, buoyed by market optimism, trading turnover in the derivatives segment is on the rise. The average daily trading volume in the cash segment fell 13 per cent to Rs. 1.31 lakh crore, the lowest since May. In contrast, the average daily trading volume in futures and options rose one per cent to a record high of Rs. 502 lakh crore.
Trading volumes in futures and options are also likely to decline due to the implementation of stricter rules on trading and stock selection. Turnover in the cash segment may also be affected as zero-cost brokerage companies may increase broking charges following the market regulator's directive. The regulator has asked these companies to remove the slab-based fee structure.
The new rules coming into effect from October 1 will affect the income of discount brokers. There is a difference between what they charge customers and what they pay to the exchanges. They are benefiting from this.
The cash segment is mostly used for long-term investments and a decline in turnover could be due to market returns and higher prices.
Though the Nifty rose 1.1 per cent in August, the small and midcap indices recorded sluggish growth. Moreover, the Nifty Smallcap 100 and Nifty Midcap 100 are trading at high PE ratios, higher than their five-year averages. Market experts attribute the decline in transactions in the cash segment to concerns over excessive prices and a possible slowdown in the market.
The perception that the market is overvalued and can fall anytime is affecting the amount of liquidity. However, strong investment from local institutions has helped to mitigate the fall. These organizations made net purchases worth Rs. 48,347 crore in August and helped prevent the market from falling.