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Markets Rebound Lifts Cash Turnover, Derivatives Slip on Tax Hike

India's stock market saw a contrasting performance in April, with cash market turnover rising 7% due to a sharp equity rebound after March's correction. Benchmark indices like Sensex and Nifty recorded their strongest monthly gains since December 2023, while broader markets surged even more. However, derivatives trading declined 6% following an increase in securities transaction tax and tighter regulations. Despite the overall drop, BSE strengthened its position in the derivatives segment, crossing a 50% notional market share for the first time.

Key Points: Markets Rebound Boosts Cash Turnover; Derivatives Dip on Tax Hike

  • Cash market turnover rises 7% on equity rebound
  • Sensex climbs 6.9%, Nifty advances 7.5% in best monthly recovery since Dec 2023
  • Derivatives turnover drops 6% due to higher STT, volatility, and regulatory measures
  • BSE derivatives market share crosses 50% for first time, surpassing NSE
2 min read

Markets rebound lift cash turnover, derivatives activity slips on tax hike

India's stock market saw cash turnover rise 7% in April on strong equity gains, while derivatives activity fell 6% due to higher STT and regulatory tightening.

"The surge in equities also lifted trading activity in the cash segment, where the average daily turnover (ADTV) touched a near two-year high of Rs 1.44 trillion. - Market report"

Mumbai, May 1

India's stock market activity in April presented a contrasting picture, as strong gains in equities boosted cash market trading, while higher taxes and regulatory tightening weighed on derivatives volumes.

Cash market turnover rose 7 per cent during the month, supported by a sharp rebound in equities after the steep correction seen in March.

Benchmark indices staged their strongest monthly recovery in over a year, with the Sensex climbing 6.9 per cent and the Nifty advancing 7.5 per cent, marking their best performance since December 2023.

This rally came after both indices had plunged more than 11 per cent in March, their worst fall since the pandemic-driven sell-off of March 2020.

The surge in equities also lifted trading activity in the cash segment, where the average daily turnover (ADTV) touched a near two-year high of Rs 1.44 trillion.

Gains were even more pronounced in the broader markets, with the Nifty Midcap 100 rising 13.6 per cent, its best performance since November 2020, and the Nifty Smallcap 100 jumping 18.4 per cent, the highest since May 2014.

In contrast, derivatives trading saw a decline following an increase in the securities transaction tax (STT) from April 1.

The STT on futures was raised to 0.05 per cent from 0.02 per cent, while options tax was increased to 0.15 per cent from 0.1 per cent.

The higher tax burden, along with elevated market volatility and tighter regulations, led to a 6 per cent drop in derivatives turnover.

The average daily turnover in the derivatives segment stood at Rs 486 trillion, nearly 18 per cent lower than the January level of Rs 592 trillion.

Market participants attributed the slowdown to a combination of tax changes, increased volatility, and regulatory measures such as limiting weekly expiries to two days.

Despite the overall decline in derivatives activity, BSE managed to strengthen its position in the segment.

The exchange's notional market share crossed the 50 per cent mark for the first time. On a notional basis, BSE's derivatives ADTV stood at Rs 269 trillion, surpassing Rs 217 trillion recorded by the National Stock Exchange of India (NSE).

In terms of premium turnover, BSE held around 31 per cent market share.

- IANS

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Reader Comments

R
Rajesh Q
Wah! Sensex up 6.9% and Nifty up 7.5% is exactly what we needed after March's hammering. BSE finally beating NSE in derivatives market share is a big deal too. But I'm skeptical about this rally's sustainability with high interest rates and tax changes. Let's see if it holds through May.
M
Michael C
Interesting dichotomy. Cash markets coming back strongly while derivatives activity slumps on higher taxes. In the US, we'd never see such a quick tax change without more debate. But then again, India's markets are driven by local retail and HNI money, and the broader market bounce seems genuine. Let's see if BSE can maintain 50% share.
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Rekha R
I'm a small investor and this STT hike on derivatives is going to hurt. I do some options trading for extra cash, but 0.15% STT is huge compared to 0.1% earlier. The government should focus on reducing long-term capital gains tax for equities instead of milking short-term traders. Volatility and higher taxes are a deadly combo for retail dalals. 😐
S
Sarah B
Good to see the Indian market resilience. Cash segment touching Rs 1.44 trillion daily turnover is impressive, almost near two-year highs. But I do wonder if the government's tax strategy is counterproductive – higher STT might push some trading activity to unregulated spaces or overseas. The 18% drop from January in derivatives is significant.
V
Vivek B
The real story here is BSE finally giving NSE a run for their money. From near-zero market

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