Market Volumes Take a Hit

Recent data reveals a sharp decline in trading volumes on D-Street, with cash and derivatives segments experiencing up to a 25% drop during the January-February period compared to last year. This downturn is attributed to unfavorable market conditions and stricter regulations introduced by Sebi in November.

Impact on Retail and Institutional Traders

An analysis by Kotak Institutional Equities highlights the adverse effects on both retail and institutional traders. The increase in contract sizes and expiry day margins has particularly impacted daily trading volumes, with retail premium turnover and active traders seeing a 20% drop. Institutional trading has been slightly more affected, with a 25% decrease in premium.

Looking Ahead

While immediate measures to tighten the F&O markets seem unlikely, the potential introduction of new position limit rules remains a point of uncertainty. The report suggests that any significant impacts will be more evident over the next 6-12 months, with another round of tightening being a low-probability scenario for now.

Cash Market Activity

The cash market hasn't been spared, showing declines in retail volume, active traders, and margin loans. Despite the drop, average daily cash volume in the retail segment remains higher than in previous years, indicating some resilience in the market.