F&O volumes in September up 14.8% at Rs 21.57 lakh crore over August

By Urvashi Valecha

The daily average turnover in the futures and options (F&O) segment has been improving steadily and has touched yet another high in September. Market experts attribute this steady rise to the lack of returns from other asset classes, lower margin on options strategies, new margin trading norms and addition of new demat accounts.

Volumes in F&O in September were at Rs 21.57 lakh crore, 14.8% up over August and higher than the one-year average of Rs 15.7 lakh crore. In January when the stock markets were at record highs, volumes were Rs 16.7 lakh crore. The cash market saw turnover of Rs 55,606 crore in September, 8.9% lower than in August.

Navneet Daga, lead analyst — institutional equities, YES Securities, said the sudden spurt in the turnovers is largely attributed to the pandemic and lack of competing asset classes. Low brokerage, ease of opening accounts, automated apps, along with significant reduction in margins on options hedge trades, markets volatility and buoyancy are the reasons behind the sharp increase in F&O turnovers.”

Additionally, the new margin trading norms came into force from September 1 which meant that traders would have to pay upfront deposit of margin when they are selling shares and not use intraday proceeds to buy shares. The participants are still to get used to the process of pledging and un-pledging of shares. The new norms have caused a shift of market participants to the F&O segment from the cash market, according to experts.

Ever since the markets crashed in March, trading volumes have been rising steadily. The DAT in September in both cash market and equity derivatives are up by 58% and 29% since January.

Jay Purohit, technical and derivatives analyst, Motilal Oswal Financial Services, said, “Beginner’s luck was perfectly in favour of the new entrants, who started trading due to the lockdown, as we witnessed a tremendous rally in the last couple of months. Now, these traders are likely to pump more money into the markets as economic activities are getting back to normal. The new margin rules for options and the cash segment will eventually result in business growth in both derivatives and cash segment. Due to the bumper listing of many IPOs, there is interest in IPOs and we expect volumes to stabilise at these levels for the coming months too.”