Fewer hands, bigger trades: Small investors retreat while large traders hold firm

Market volatility thins retail ranks.

Over the past year, as markets went through phases of sharp corrections and heightened uncertainty, investor behaviour in the equity cash segment has quietly but clearly shifted. The stress of the downturn appears to have pushed smaller investors to the sidelines, while large, high-turnover players have largely stayed put, continuing to dominate trading activity.

Data from the NSE's latest Pulse report shows a steady thinning out at the lower end of the participation spectrum. Investors with accounts of up to Rs 10,000 account for nearly a third of the investor base, but their contribution to turnover is almost negligible at just 0.03 percent.

Those in the Rs 10,000 to Rs 1 lakh bracket form another large chunk of participants, yet together these two segments, which make up about 70 percent of investors, contribute less than half a percent of total cash market turnover. Compared with a year ago, participation in these lower slabs has softened, suggesting that market volatility has dented the confidence of smaller, more price-sensitive investors.

The contrast with larger investors is stark. Traders with monthly turnover above Rs 10 crore represent a mere 0.2 percent of participants, but they account for nearly 78 percent of total equity cash turnover. Add the Rs 1 crore to Rs 10 crore segment, and just 1.7 percent of investors end up controlling over 90 percent of the market’s cash volumes. Importantly, this dominance has held firm through the past year, even as the market navigated periods of weakness.

What makes this trend more telling is that it has played out alongside rising activity. Average daily turnover in the equity cash segment climbed to Rs 1,04,576 crore in November, a five-month high and higher than last year as well. Yet the number of active investors fell month on month, pointing to a market where volumes are being driven by fewer, but much larger, trades. The average trade size, now at a 54-month high, reinforces this growing concentration.

The same pattern is visible beyond the cash market. In equity options, a small group of high turnover traders continues to generate the bulk of premium volumes, while in equity futures, a narrow cohort accounts for almost the entire turnover. Across segments, institutional investors and proprietary trading firms dominate the top slabs, providing liquidity even when broader participation fades.

While smaller investors appear to have pulled back during the downturn, high turnover investors, largely institutions and proprietary traders, have displayed steadier hands, maintaining liquidity and driving volumes even as participation narrowed.