Data from the National Stock Exchange (NSE) and the BSE clearly show that the total number of transactions in April — the first full month of the lockdown — dipped by almost 14%, while the total number of shares traded fell by a much higher proportion.
In April, the number of equity trades on the NSE fell to about 36 crore from the almost 42 crore in March, while the total number of shares traded fell a little over 27% from 5,884 crore to 4,273 crore equity shares.
On the BSE, while the number of trades dropped almost 14%, the total number of shares traded fell by 36%. Market participants attribute this to the increased underlying risk aversion among the investor community following virus-related global lockdown.
More importantly, the fall in the turnover came even as the benchmark Sensex rose 14.42% in April, the highest monthly gain since May 2009, when the barometer had gained 28.26%.
“A combination of factors like crude prices crashing to settle in negative territory on settlement day, gold bouncing very rapidly, equities remaining highly volatile and commodities in general remaining soft made investors very risk averse in April,” said Arun Kejriwal of Kejriwal Research and Investment Services.
Interestingly, the fall in number of trades and the quantum of shares traded comes close on the heels of many brokerages registering a spike in the number of new client additions in March.
Flavour of the season
Most of the discount broking firms like Zerodha, 5Paisa and Upstox, among others, that predominantly cater to retail clients and are completely dependent on technology — clients trade through their apps — had reported a huge jump in new client additions.
“When the lockdown was announced, it became imperative for the people to organise their daily schedule. This also included people who are actively involved in the stock market. As life started getting re-organised, they had the time to devote to stock markets. This trend also hints at higher volumes in the coming months as clarity emerges in global and domestic factors driving the stock markets,” explained Mr. Kejriwal.
Incidentally, both average daily turnover and the average trade size registered a marginal increase on the NSE in April.
While the average trade size increased to ₹25,118 in April from ₹24,065 in March, the average daily turnover rose to ₹50,322 crore from ₹47,917 crore in the same period on the NSE.