Markets Rebound Lifts Cash Turnover as Derivatives Activity Slips After Tax Hike
MUMBAI, India — India’s stock market activity showed a split trend in April, with a sharp rebound in equities lifting cash market turnover while higher taxes and tighter regulations weighed on derivatives trading.
Cash market turnover rose 7% during the month, helped by a recovery in stocks after a steep March selloff.
The Sensex climbed 6.9% in April, while the Nifty advanced 7.5%, giving both benchmark indices their strongest monthly performance since December 2023. The rally followed a difficult March, when both indices fell more than 11%, their worst drop since the pandemic-driven market crash of March 2020.
The rebound also boosted cash segment trading. Average daily turnover in the cash market reached a nearly two-year high of Rs 1.44 trillion.
Broader markets posted even stronger gains. The Nifty Midcap 100 rose 13.6%, its best monthly performance since November 2020, while the Nifty Smallcap 100 jumped 18.4%, marking its strongest monthly gain since May 2014.
Derivatives trading, however, declined after an increase in the securities transaction tax took effect April 1. The tax on futures was raised to 0.05% from 0.02%, while the tax on options increased to 0.15% from 0.1%.
The higher tax burden, combined with market volatility and tighter regulations, contributed to a 6% drop in derivatives turnover.
Average daily turnover in the derivatives segment stood at Rs 486 trillion, nearly 18% below the January level of Rs 592 trillion. Market participants attributed the slowdown to the tax changes, increased volatility and regulatory limits on weekly expiries.
Even as overall derivatives activity weakened, BSE gained ground in the segment. Its notional market share crossed 50% for the first time, with derivatives average daily turnover of Rs 269 trillion on a notional basis. That exceeded the Rs 217 trillion recorded by the National Stock Exchange of India.
On a premium turnover basis, BSE held about 31% of the derivatives market. (Source: IANS)
