Trading volumes surge without matching turnover as action shifts to low-priced stocks

A distinct divergence has emerged in market activity: trading volumes have risen sharply, but turnover growth has remained muted. In June so far, average daily cash volumes on the BSE and NSE have surged to an 11-month high of 5.75 billion shares, up 20 percent from May and 12 percent from April. However, average daily turnover has edged up only 1 percent to around Rs 1.20 lakh crore, following a 11 percent rise in May.

This divergence is primarily driven by a shift in market behaviour, cause by rising participation of short-term traders. Short-term traders tend to focus on quick price movements and often involve low-value stocks in large quantities, which increases volume but contributes relatively little to total turnover in rupee terms, experts said.
Another factor contributing to the sluggish turnover could also be rise in large block deals—transactions typically executed between institutions in sizable quantities at a pre-agreed price. While these deals accounted for around Rs 55,000 crore in May and Rs 45,000 crore in June, that they were executed at discount to prevailing market prices caused turnover to rise less, some experts said.

With benchmark indices such as the Nifty trading in a narrow range since mid-May, broader market interest has rotated toward mid and smallcap stocks. These counters, favoured largely by retail and non-institutional participants, tend to trade in higher volumes at lower prices. As a result, while share counts are up, the average transaction value per share has declined to its lowest in over a year.

In terms of returns, the Sensex and Nifty have gained 0.7 percent and 1.2 percent respectively in June. The BSE MidCap and SmallCap indices have climbed 1.5 percent and 1.2 percent. Market capitalisation data reflects a similar trend: the total mcap of all BSE-listed companies is up 1.3 percent for the month. Within this, Sensex firms rose 1 percent, MidCaps 1.6 percent, and SmallCaps just 0.4 percent. Notably, the rest of the listed universe—mostly microcaps—saw a 2 percent rise in market cap, highlighting renewed interest in lower-tier stocks.

Narinder Wadhwa, Managing Director at SKI Capital Services, noted that algorithmic and high-frequency trading systems have played a significant role in increasing volumes without a corresponding increase in value. These systems often generate rapid, automated trades for marginal price movements, contributing to market noise without adding meaningful turnover. He added that broader institutional activity remains cautious due to stretched valuations, lack of clarity from central banks, uncertain earnings visibility, and global macroeconomic concerns.

Despite external headwinds—such as geopolitical instability in the Middle East and global monetary policy uncertainty—market sentiment has held firm. The S&P 500 is just 2 percent below its record high, and domestic risk-off phases continue to be met with buying interest. The India VIX, currently at 14 and below its one-year average of 15, indicates muted demand for downside hedging and sustained investor confidence.

Akshay Chinchalkar of Axis Securities expects a breakout in the Nifty, with strong support in the 24,300–24,700 zone. He projects upside targets at 25,500 and 25,800, should the consolidation phase resolve positively.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.