D-St newbies may be losing interest in stock market, hints key barometer

NEW DELHI: While the Nifty is down 15 per cent from its October peak, the average daily cash volumes have plunged 45 per cent since then on NSE. Market experts indicate that this could be a sign of waning interest of new investors who have made losses in recent months.

A recent report by Motilal Oswal Financial Services shows that when the market peaked in October last year, NSE's daily average cash volumes also peaked at Rs 814 billion and has now halved to Rs 446 billion.

The fall is sharper in the broader market. Midcap volumes have dropped by 66 per cent and 52 per cent in case of smallcaps.

As the Nifty was rallying from the low of 7,611 in March 2020 to the high of 18,604 in October 2021, millions of retail investors got lured into stock trading.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said trading volumes also exploded during that euphoric phase. “Day trading became a fad among the newbie investors. The market correction from the October peak has resulted in losses for the newbie investors and many are staying away from trading,” he told ETMarkets.

RBI’s recent Financial Stability Report had a graph showing how the number of active traders in both stock exchanges - BSE and NSE - has dipped to below the 1 crore mark in May.

Describing the cash volumes as the cream of the market, Kranthi Bathini of WealthMills Securities said it is an indicator of weakness or strength in the market. “If the volumes are increasing, it is reflecting strength in the market. But if the numbers are declining, it means that slowly the interest is coming down,” he said.

Unlike F&O, only a very small portion of cash trades is done using leverage.

“When the market is correcting, high beta stocks in the midcap and smallcap segment are among the worst affected and that is why you see volumes are lower in those segments. Fund managers and HNIs now find largecaps safer,” he said.

Brijesh Bhatia, Senior Research Analyst, Equitymaster, also blamed it on the fear amongst investors in a declining market.

“Easy flow of profits in 2021 made investors and traders greedy, resulting in leveraging their risk. Additionally, SEBI rules on curbing leverage by brokers too triggered the loss of volumes in the market,” he said.

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