India’s equity cash market has witnessed its sharpest annual fall in turnover in the last three years, underscoring a visible slowdown in investor participation amid choppy markets and uneven returns. Trading activity in the derivatives segment has also weakened, marking a rare contraction after more than a decade of steady growth.
Data released by the stock exchanges show that the combined average daily turnover of the NSE and BSE in the cash segment declined to about Rs 1.08 lakh crore so far in 2025, down nearly 16 percent from Rs 1.28 lakh crore recorded in 2024. This is the steepest year-on-year contraction since 2022, reflecting reduced secondary market engagement by investors.
Derivatives trading, which has been a key driver of overall market volumes in recent years, also saw a notable slowdown. The combined futures and options turnover across the two exchanges fell around 17.7 percent year-on-year to Rs 387.95 lakh crore, compared with Rs 465.96 lakh crore in the previous year. This marks the first annual decline in derivatives volumes since 2013, the earliest year for which comparable data is available.
Market participants attribute the fall largely to tighter regulatory measures introduced by the Securities and Exchange Board of India (Sebi) to rein in speculative and high-frequency options trading. Higher lot sizes, increased margin requirements, fewer weekly expiries and the withdrawal of certain spread benefits have reduced the attractiveness of turnover-heavy intraday strategies. The exit of some major liquidity providers has further dampened volumes, traders said.
Sentiment in the secondary market has also been weighed down by muted returns outside large-cap stocks. While benchmark indices Sensex and Nifty have risen about 10 percent each so far in 2025, the broader market has lagged. The BSE MidCap index has edged up only marginally, while the BSE SmallCap index has declined sharply, pointing to selective risk appetite and narrower participation.
Persistent foreign investor selling, stretched valuations in pockets of the market and ongoing geopolitical uncertainties—including concerns over global trade tensions—have added to caution among investors. As a result, many retail and direct investors have reduced trading activity in the cash market.
High transaction costs have compounded the slowdown. Market participants say elevated securities transaction tax, along with rising exchange and regulatory charges, has hurt trading economics, particularly for ultra-high-net-worth individuals and institutional participants. This has encouraged some investors to shift focus toward primary market offerings, block deals and longer-term investments.
Despite the broader slowdown, activity in IPOs and large negotiated trades has remained relatively resilient. However, unless market breadth improves and regulatory changes stabilise, participants expect cash and derivatives volumes to remain under pressure in the near term.
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