Equity cash market volumes surge even with peak margins in play

“The growth in volumes from January to April is due to the large number of new accounts being opened by brokerage firms for this period,” said Hemang Jani, head of broking & distribution,

Financial Services.

Volumes hit a 14-month low of ₹57,900 crore in December 2021. The increase in volumes since then has been attributed to many new client accounts being opened across brokerage firms between January and April, high volatility in mid- and small-cap stocks, and consistent selling by foreign portfolio investors, said brokers.

Agencies

In April, the average daily volumes hit a six-month high of ₹73,320 crore, compared with ₹71,016 crore in March, and ₹63,255 crore in February 2022. Non-institutional volumes have also steadily increased from a December 2021-low of ₹32,742 crore to ₹41,086 crore a day in April 2022.

“Although overall volumes have risen in the last four months due to consistent selling by FPIs and buying by domestic institutions, the retail turnover has been stable,” said B Gopkumar, CEO, Axis Securities. “New investors are really bringing good margin, and the system has been streamlined.”

About 11.6 million new demat accounts have been opened between January and April this year, according to the data from the two depository agencies –

Services () and National Securities Depository (NSDL).
Prakarsh Gagdani, CEO of , said retail volumes in April have also gone up drastically because of high volatility in the small- and mid-cap stocks.

Mid-cap stocks outperformed the large-caps in April. While the Nifty index declined 3.21%, the Nifty Midcap index fell just 0.8%.

The market regulator introduced several new norms regarding margin and pledge of shares last year, but none of them severely impacted volumes on the bourses.

Sebi has introduced the concept of peak margin reporting, in which stockbrokers will calculate margin based on the end of the day position and the intraday peak position. The new system has been adopted over four phases. In the first phase, from 1 December 2020, investors were asked to keep 25% of the peak margin available with the broker, while from 1 March 2021, the margin requirement was increased to 50%. Similarly, from 1 June, the margin requirement was 75% of the peak margin, and from 1 September, it was 100%. Since then, the cash market volumes declined just 2%, while non-institutional turnover has been almost flat.