Trading in equity cash segment slows down on high valuation, poll uncertainty

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Trading in cash equity segment of NSE and BSE have slowed down in the last two months, even as the markets are hitting a new high.

Retail and high networth investors are holding back their investments, due to high volatility and run-away valuations amid clouding uncertainty on the General elections outcome.

The number of trades on NSE has fallen 28 per cent in last two months. It was down from a high of 87.21 crore in February to 68.10 crore in April.

Similarly, on BSE it was down 38 per cent from 10.58 crore in February to 7.66 crore in April, according to Geojit Research data.

Despite stock prices rallying, the average turnover on NSE dipped 10 per cent to ₹1.06 lakh crore in April against ₹1.17 lakh crore logged in February while that of BSE was down to ₹7,638 crore against ₹10,527 crore registered in the period under review.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said the sustained sell-off by foreign portfolio investors in cash market and restrain from fresh investment by retail and high networth investors due to market volatility.

FPIs have sold equity worth ₹34,460 crore in the cash market this month alone, due to cheap valuation of Chinese stocks, he said.

On the other hand, he added the decline in voter turnout in the first three phases of voting clouded the bullish view of an easy victory for the BJP led National Democratic Alliance, he added.

However, the situation is once again slowly changing in favour of the ruling dispensation and the FPI are returning to market in recent days, said Vijayakumar.

Kunal Nandwani, Co-founder and CEO of uTrade Solutions said equity investing and trading have decelerated in recent months due to a prolonged election period, prompting retail investors to adopt a wait-and-watch approach.

The combination of political uncertainty and high market levels is causing retail investors to pause and reassess their strategies, contributing to the overall slowdown in market activity, he added.

Mahavir Lunawat, Managing Director, Pantomath Capital Advisors said, “The UN has adjusted the country’s growth forecast for this year to 6.9 per cent from 6.2 per cent on back of robust domestic economic activity driven by substantial public investment and resilient private consumption.

Arvind Panagariya, Chairman of the 16th Finance Commission, has also expressed confidence that India will become the third largest economy globally by 2027-28, if it continues to push ahead with the growth momentum witnessed in the last two decades, he added.