Average daily turnover in NSE’s equity cash segment sees massive fall in March but gains 98% in FY24

Investment patterns underwent a notable shift in the last month of the previous financial year, driven by increased market volatility that unsettled investors.

In March, there was a significant decrease in daily trading volumes across the cash segment of stock exchanges, largely due to increased volatility in the equity market.

The average daily turnover in the equity cash segment of the National Stock Exchange (NSE) experienced a notable decline of 13.33 percent Month on Month (MoM), reaching ₹1.02 lakh crore. This decline marked the most significant drop since October 2023.

The average daily turnover in the equity cash segment was ₹1.18 lakh crore. Before this, the average daily turnover in October was ₹67,175 crore, down over 20 percent from ₹84,381 crore in September.

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After the decline in October, it rose over 9 percent MoM in November at ₹73,440 crore, then 41.5 percent MoM in December to cross ₹1 lakh crore for the first time even in FY24.

The first 2 months of the calendar year 2024 also saw strong surge. In January 2024, the average daily turnover in the equity cash segment was at ₹1.15 lakh crore, up over 10 percent from December 2023. Meanwhile, in February 2024, it further rose to ₹1.18 lakh crore, up almost 3 percent MoM.

Before massively declining in October, the average daily turnover witnessed a steady rise between April and September.

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Between April last year and March this year, the average daily turnover in the cash space has jumped over 98 percent, which showcases the strong demand for equity among investors.

Overall, Indian benchmark Nifty delivered robust returns, rising around 25 percent in FY24. While most experts believe that the new financial year will also witness similar returns, they also advise caution in the near term on the back of high valuations as well as the upcoming general elections.

Meanwhile, in March, while the benchmark Nifty experienced a 1.6 percent increase, the mid and small-cap indices witnessed declines of 4.55 percent and 0.6 percent, respectively. Analysts attributed this trend to concerns raised by the Securities and Exchange Board of India regarding the valuations of mid and small-cap stocks, which dampened investor sentiment and led to reduced participation in these segments. This in turn also led to a decline in average daily turnover in the previous month.

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Looking ahead, experts anticipate an improvement in investor participation. The recent milestone reached by the S&P500 index in the US is expected to have a positive ripple effect on Indian equities. Meanwhile, foreign portfolio investors have also shown a notable interest in Indian equities during March, and if this trend persists, it could support stock prices.

Moreover, market sentiments received a boost last week following a more dovish stance from the US Federal Reserve, which drove global indices to record highs and bolstered stocks. The Fed's decision to maintain interest rates aligned with market expectations, signaling no immediate plans for rate hikes despite a strong labor market. The Fed's projection of three rate cuts for the year underscores the importance of a sustainable slowdown in inflation. Analysts suggest that leading up to the elections, the Nifty50 index may remain within a narrow range with an upward bias.

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Furthermore, they added that the outcome of the monetary policy review by the Reserve Bank of India will be closely monitored for insights into liquidity management and potential cuts in policy interest rates.

“Despite near-term volatility stemming from impending elections and mutual fund stress tests, our market outlook remains bullish. The Nifty 50 briefly corrected from 22,500 to 21,700 in mid-March before rebounding to close the financial year at around 22,300, demonstrating resilience. Challenges persist, with expected volatility amid elections and upcoming Q4 results, underscoring the need for strategic decision-making. Notably, investors are favoring stability, shifting from micro/small-caps to mid/large-caps. Amidst these changes, it's clear that careful navigation is crucial in today's market environment,” said Robin Arya, smallcase Manager and Founder, GoalFi.