St cashes out as volatility reigns

“Not only is there no God, but try finding a plumber on Sunday.” —Woody Allen

Well, just try finding an investor today.

The average daily cash turnover on Indian exchanges has slid to 33-month lows as weakening macros and falling corporate profits have made people wary of investing, reducing it to a traders’ market.

At Rs12,311 crore, the combined average daily cash market turnover during November is the lowest since February 2009, when weak global markets led to average cash volumes dipping to Rs10,743 crore.

In fact, the cash trading volumes have dropped nearly 45% over the last one year, since the markets started correcting from their peak levels of 21000 in November 2010.

“The cash turnover has been dropping month on month with many clients staying away from the markets as they can’t handle volatility. The cash volumes have been low of late and it’s mostly the traders who are fighting it out to make some wealth. With markets being extremely volatile, the stop-losses in derivatives segment too are getting triggered faster and it’s covering of positions which is driving the market on either side,” said Jitendra Panda, head of sales - broking, Future Capital Securities.

The benchmark Nifty index has been trading in a range of 4700-5400 over the last five months with sharp bounce-backs at lower levels on account of short covering and resistance at higher levels.

Piyush Garg, CIO, ICICI Securities feels the local markets are moving in tandem with other markets as fast changing global sentiments determine the liquidity and fund flows towards risky asset classes.

“There has been no major buying from institutional investors in the cash segment. Markets have remained at the same levels over the last several months and only a few long-term investors are buying. The trading volumes have been contributing more than 80% to overall market volumes,” he said.   

“The investors are probably waiting to enter at lower levels,” said Garg.

Even as the markets rose 7.75% in October, investor participation was low as average daily cash volumes stood at just Rs12,464 crore for the month.

“Investors are in a dilemma over where to put their money. All the sectors are facing issues and there are no positive triggers seen in the near future. Also, many of the investors who have been holding on to large blue chips have not been able to book profits or invest afresh as these investments have not yielded any returns,” said Panda.

Experts believe the worsening domestic macros and disappointing quarterly results have further raised doubts in investors’ minds and we may see buying emerge only when things get clearer on both global and domestic fronts.

“The domestic concerns have again started coming to the fore over the last 10-15 days as quarterly results of some of the companies have been worse than expected. The corporates have been facing the brunt of high interest rates and mark-to-market forex losses have made things worse. Mid-caps have been decimated as the macro environment is not conducive for their growth and only a few large-caps may be able to survive. Until the macro environment improves and a clear solution to the European crisis emerges, we would continue to see this risk on, risk off trade playing out globally,” said Garg.