By Siddhant Mishra
The benchmark indices have scaled fresh peaks this year, with the BSE Sensex and Nifty50 posting gains of 7.5% and 7.4%, respectively. The Sensex recorded an all-time high of 63,284.19 and the Nifty 18,812.50 on December 1, 2022.
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According to data by Bloomberg, the average combined (BSE and NSE) traded volume so far this year has been 3,163 units per million, down 16.46% from 2021, while the average combined turnover has been Rs 61,742 crore, down 17.89%.
The average figures for 2021 stood at 3,786.41 units per million (up 23.81% from 2020) and Rs 75,198 crore (up 30.52% from 2020).
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“The lower volumes, or narrow rally, were also visible in terms of relative weakness of small/mid-caps. During the year, the small-cap and mid-cap spaces have underperformed the headline index. Against gains of almost 7% in the Nifty, the small-cap index is still down 10%. Also, with FII flows coming back, focus has been on sectoral heavyweights. Therefore, broad-based participation is still missing and only recently we have seen some momentum coming into the mid-cap and small-cap segments,” said Pankaj Pandey, head (research), ICICIdirect.
Both domestic and global factors have likely influenced the narrow rally, and there could be a further drop in volumes this month.
“The average volumes are down mainly for two reasons. The first is the RBI’s credit policy, due on Wednesday. The outcome is more or less known to the Street. However, the governor’s remarks on the outlook will count for a lot. The second is the Gujarat election results, due on 8 December. Both these events can bring volatility in the market. On the global front, traders are facing another major event on Thursday — the US Fed meeting on interest rates. As data related to the US economy indicates a dovish sentiment, the Fed may consider tightening policy. Volume typically falls during the Christmas holidays, after the Fed meeting,” said Shrikant Chouhan, head of equity research (retail), Kotak Securities. He added that these factors have prevented traders from taking large positions in the market.
