New Delhi: Amid turbulent times for the stock markets across the world, the equity turnover fell on Indian bourses as well in 2012, but the fall was meagre at 1.57 per cent when compared to the global average. Globally, the equity turnover fell sharply by 14.7 per cent, while the fall was nearly 8 per cent for the bourses in Asia Pacific region as well.
On the other hand, the collective equity trade volume of two Indian bourses, NSE and BSE, fell by 1.57 per cent to 161.74 crore during January-November period of 2012, as per data from the World Federation of Exchanges (WFE). The total number of equity trades on the exchanges across the world was 907 crore for the same period. Indian markets are expected to further improve their tally in 2013, as a new bourse MCX-SX is expected to begin operations as a full-fledged stock exchange.
The Asia pacific region registered a decline of nearly 8 per cent to 533.4 crore trades in January-November period of 2012. The global data for December is still awaited as one last trading session would take place on December 31. Experts said economic uncertainty across the globe, political deadlock in Europe, fiscal cliff debate in the US, policy logjam in India and lack of trading opportunities were main reasons for fall in equity trading in India and rest of the world.
Individually, National Stock Exchange (NSE) recorded 129 crore equity trades, showing a marginal improvement of one per cent compared to 2011, and grabbing the mantle as the top bourse among 51 global peers. NSE was the third largest bourse in the world in 2011. BSE, ranked seventh globally in equity trades, recorded 32.71 crore trades in the period from January to November.
"Indian markets turned out to be better performing markets as compared to other emerging markets and government reforms are also bringing faith back in Indian equities markets resulting in higher interest among the traders and investors," Religare Securities EVP and Head Retail Research Rajesh Jain said.
Experts believe that NSE and BSE stood their ground among the top global bourses largely owing to heavy investment flows from Foreign Institutional Investors (FIIs). "Our entire policy is pro-FII, what ever volumes we have is basically because the global players are investing...the participation of retail investors and domestic investors is negligible," CNI Research CMD Kishore Ostwal said.
On the flip side, the experts say there was lack of confidence within the domestic and the retail investors, as Indian investors had lost confidence in 2011 and were seen looking for opportunities to exit during 2012. "2012 saw the equity markets reviving but the retail investors used the rally in 2012 to exit. Equity funds witnessed outflows of Rs 12,702 crore till November this year, the second highest outflows in the category witnessed in the last six years," Jain said.
Ostwal also said "the main reason for slow equity trades volume is that even though we have had market touching a new high, the retail investors have not come out and participation by domestic investors is negligible."
"Market is all about the confidence of the market participants but if everything goes in opposite direction, say ballooning inflation, shrinking industrial output data, it is sure to dump the confidence," SMC Global Securities Head (Research) Jagannadham Thunuguntla said.
"Moreover, in 2012 the market has moved in a band, there were very low per cent of volatility, say of 3-4 per cent on a monthly basis, which has stolen all the arbitrage opportunities," he added. Experts said retail investors opted to get out of mutual funds as and when they got an opportunity resulting into lower participation and decreased number of trades.
On an optimistic note though, the market players said the outlook for the coming year is positive largely owing to expectations of larger inflow from FIIs and India still being a favourable destination for investments. "The coming year appears to be more promising as far as the Indian markets are concerned as fundamentals are expected to improve and we may see an increase in interest in Indian markets from the FIIs as the concerns over the fiscal cliff and growing concerns in Europe may weigh heavily on their minds making India a safer investment option," Jain said.
Moreover, the equity trading could also pick up if more measures are taken to boost the markets, including a possible abolition of Security Transaction Tax (STT). "STT alone is a big cost along with other costs like Service Tax, Transaction charges of NSE, Brokerage etc. A trader has to recover all these charges before he can actually make profit from his trade," Jain said.
"The combined charges being too high, the trader finds it difficult to make profit from trading. The cost of trading should be reduced for more trading activity," he added. Thunuguntla also said that removal of STT would be a major attraction for further FII inflows.
The big-bang reforms introduced by Indian government such as FDI in various sectors and a cautiously improving global economy coupled with overflowing central bank cash are expected to revive the stock markets in India and the rest of the world as well. "At this juncture, with the improved market sentiments ahead of the year I expect old participants also would return back to their work and new participants would participate aggressively," Thunuguntla said.
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