Cash volumes in local equity markets hit a 21-month high in July, rising nearly 15.4 percent from the previous month, as investor participation increased after a record rally, analysts said.
The combined average daily turnover (ADTV) in the equity cash segments of BSE and NSE was at its highest point since October 2021. The ADTV stood at Rs 77,899.02 crore between July 1 and July 28, which is a significant increase from Rs 67,489.16 crore recorded in June. This marks the fourth consecutive month of rise in ADTV.
Siddharth Khemka, analyst at Motilal Oswal Securities, said the surge in cash volumes was mostly because of the sharp rise in the market and participation of broader markets.
India's flagship Sensex and Nifty gained 2.3 percent each in July while BSE MidCap and SmallCap jumped 5 percent and 6 percent respectively. Since April, both benchmark Sensex and Nifty advanced 15 percent and 16 percent while BSE MidCap and SmallCap climbed 29 percent and 32 percent respectively.
Analysts said the surge in markets in July was not limited to large-cap stocks alone; mid and small-cap stocks also joined the rally. The month began with Nifty showing an up gap, indicating an exuberant sentiment. This was fuelled, in part, by the continuous inflow of foreign portfolio investments (FPIs), analysts said.
Robust FPI flows
"A significant factor driving the recent market rally has been the continuous inflow of investments from FIIs. As per the latest data available for FY24, FIIs have remained net investors with a substantial amount of $17.73 billion invested in the markets," said Prashanth Tapse, Senior VP (Research) at Mehta Equities. The prevailing bullish sentiment is evident across all categories of investors, including retail, DII and FII, he added.
Increased activity in the mainboard and continued SME initial public offerings along with new investors rushing to open demat accounts to join the rally also improved the sentiments.
In July around four companies announced mainboard IPO plans to raise Rs 2200 crore. Around 12 companies announced SME IPOs in July to raise Rs 327.40 crore. So far 2023, 13 companies garnering tremendous subscriptions raised over Rs 10,200 crore via mainboard IPOs. Analysts anticipate more IPOs in line, suggesting a continued trend of heightened IPO activity. Notably, the SME segment also experienced a surge in share sales with 64 firms raising around Rs 1,727 crore via SME IPOs since the start of 2023.
According to data from the Central Depository Services and National Securities Depository, the number of demat accounts opened in June totalled over 2.36 million, marking the highest account opening rate since May 2022, compared to 2.1 million additions a month ago and 2.3 million a year ago.
Fresh derivatives record
Meanwhile, the derivative segment volume hit a fresh all-time high jumping over 23 percent from a month ago. The ADTV for the derivative segment was Rs 318.70 lakh crore in July 2023 so far, up 23.4 percent from the Rs 258.18 lakh crore in June 2023.
"Derivatives volumes kept rising in July to benefit from the market upmove and corporate results-based volatility. Traders have taken to options trading in a big way to limit their cash outgo (cash markets carry larger and mandatory margins) and losses while hoping for small and fast upside on a relatively large exposure," said Deepak Jasani, Head of Retail Research, HDFC Securities.
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