Daily average turnover in F&O segment for July crosses Rs 19 lakh crore

In light of the increasing volatility in March, the Securities and Exchange Board of India (Sebi) had introduced volatility curbs which were extended till July 30, in spite of this, the F&O segment volumes witnessed a record high in July.

By Urvashi Valecha

Daily average turnover (DAT) in the Futures and Options (F&O) segment for July crossed Rs 19 lakh crore, which is higher than that seen in the pre-Covid-19 months. In fact, it is a record high, which according to market experts, has been driven by new account additions, confidence in traders for generating short-term money and the markets trading in the green despite the pandemic.

The DAT for July in the F&O segment stood at Rs 19.1 lakh crore, which is higher than the one year average of Rs 14.9 lakh crore. In January this year, when the stock markets had reached their all-time highs, the DAT stood at Rs 16.7 lakh crore. In the cash market, the DAT in July stood at Rs 58,364.31 crore, marginally lower than that seen in June. The cash market volumes had been hitting record highs since the last three months but did not for July.

In light of the increasing volatility in March, the Securities and Exchange Board of India (Sebi) had introduced volatility curbs which were extended till July 30, in spite of this, the F&O segment volumes witnessed a record high in July.

According to Shrikant Chouhan, executive vice president — equity technical research, Kotak Securities, this points to the return of confidence of traders in the stock market. “There is a lot of momentum in the markets because the minds of traditional traders are not timing another big decline in the market which was the case in June where there was a view that the markets could fall to 9,400 or 9,000 even.”

According to him, the F&O trades surging compared to the cash market shows that the traders are now confident to make short-term money instead of buying in cash that is usually for long term investors.

Additionally, the stock markets have witnessed a surge in the registration of new accounts which points to an increase in participation. Rajesh Palviya, head — technical and derivatives, Axis Securities, said, “The overall market participation has increased be it the number of accounts, be it the number of trades and as the participation has increased and number of accounts have increased especially in July we see the rise in volumes. Whenever there is bullish territory in the market, we generally see this kind of uptick in terms of volumes and market positions. Those who are trading in bullish territory in the last three months, the market performance has been good in terms of price action and the broader market is performing that is why we are seeing higher volumes.”

He expects the volumes to rise further if the markets remain in consolidation mode or go higher.

Going forward Sebi has, from September 1, mandated that the new margin trading norms would come into existence which would mean that market participants would have to pay for upfront margins while trading in the cash market as well.

“It is likely that there would be a shift in traders who want to move to the derivative markets and trade in the stocks instead of paying upfront margins in the cash market. So, this will lead to a rise in the derivative market participation and cash market could see some negativity,” said Rajesh Palviya.