Key trading metrics on BSE, NSE show high investor participation in ongoing rally

The Indian benchmark indices – S&P BSE Sensex and the Nifty – are trading at record levels and if the trading data is anything to go by then the current rally seems to be on the back of an increasing level of investor participation as well. 

This assumes significance as many times in the past, stock market rallies have happened on the back of thin participation that only causes short-term upswings or, in other words, the rallies are not able to sustain for a longer period. 

Data from both the exchanges – BSE and the National Stock Exchange (NSE) – show that key trading metrics like the average daily turnover and the number of trades are currently at multi-month high. 

For BSE, which is Asia’s oldest stock exchange, the average daily turnover in the month of June was pegged at Rs 5,156.67 crore, which was the highest since September 2022 when it was Rs 5,369.67 crore. 

For NSE, the average daily turnover in the month of June was Rs 62,334 crore, which was the highest since April 2022, when the bourse registered an average daily turnover of Rs 68,013 crore. 

On the other hand, June saw a total of 43.16 crore trades registered on NSE, which was again the highest since September 2022 when 45.5 crore transactions were done on the NSE platform. 

Incidentally, the number of trades is a better metric to check on the overall level of investor participation as the value of trading is a factor of the stock price as well. In other words, the average daily turnover would jump in a rising market even if the number of trades is constant. 

Meanwhile, the number of trades on BSE was pegged at 5.42 crore in June – the highest since December last year when a total of 6.2 crore transactions were registered on the equity segment of BSE. 

Interestingly, the trading metrics have risen even as the overall number of retail investors have seen a dip when compared to the Covid period when a record number of new investors entered the markets. 

As per NSE’s monthly ‘Market Pulse’ report, the number of retail investors rose sharply from three million in January 2020 to nearly 12 million in January 2022. Thereafter, it fell to 6.7 million in April 2023, before rising to 8.4 million in May 2023. 

“This is in-line with the trend in new investor registrations and retail trading activity witnessed during the period. Despite the drop in 2022 and 2023, number of active investors trading in secondary markets continued to remain well above the pre-pandemic level,’ stated the NSE report.

The 30-share Sensex touched a new all-time high of 65,898.98 on July 7.

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