Industry Odisha Bureau, Oct 05: Cash volumes on the Indian stock market fell 11.7% in the September quarter. Options premium turnover dropped a steeper 27%. Costlier crude, foreign selling and new trading rules weighed on activity.
The Indian stock market spent the September quarter fighting on several fronts. Crude surged, bond yields climbed and foreign investors kept selling. New trading rules arrived at the same time. The result was a clear decline in cash and derivatives volumes.
Options take the bigger hit
Combined average daily cash turnover on NSE and BSE fell 11.7% sequentially. It slipped to ₹1.29 trillion in July–September. That reversed a 13% rise in the April–June quarter.
Derivatives trading weakened far more sharply. Average daily index-options premium turnover fell 27% to ₹63,326 crore. It had already dropped 11% in the June quarter. That makes this the second straight quarterly decline.
Premium turnover measures money paid for options, not their larger notional value. Both cash and options turnover remain above levels seen a year earlier.
Oil turns the mood
Crude oil was the biggest swing factor. Brent rose 34% to $98 a barrel in the September quarter. It had fallen 38% to $73 in the previous quarter. The US-Iran war and global supply disruptions drove the reversal. Costlier oil pushed up bond yields and stoked market volatility.
Equities followed oil’s swing. The Nifty 500 fell 4% to 22,072 over the quarter. It had gained nearly 10% in the first quarter of FY27. Falling prices tend to dampen appetite for fresh trades.
Foreign money keeps leaving
Foreign portfolio investors sold ₹1.38 trillion of Indian equities this fiscal year. That figure covers the period up to 1 October. It follows record FY26 selling of ₹1.8 trillion. Persistent outflows reduce fresh demand and add to volatility.
Independent market analyst Ambareesh Baliga says incremental flows have clearly dropped. Investors who averaged down on falling stocks have lost money, he notes. That has meant fewer transactions in both segments.
Rising bond yields add weight
Rising bond yields tightened the squeeze. India’s 10-year government bond yield rose 43 basis points to 7.18%. It had fallen 21 basis points to 6.75% in the first quarter. Hopes of a West Asia resolution drove that earlier drop.
US Treasury yields have hit their highest in more than two decades. Higher yields abroad have pulled foreign investors out of Indian assets. Safer returns elsewhere can make riskier equities less attractive.
New rules, new frictions
Domestic regulation added a separate layer of pressure. From July, the RBI required banks to fund proprietary traders only against full collateral. Prop traders are among the market’s biggest participants.
Sebi’s Closing Auction Session, or CAS, began on 3 August. It replaced volume-weighted continuous trading in the last 15 minutes. The new session has reportedly faced liquidity problems. These have distorted prices on weekly expiries of Nifty and Sensex options.
Baliga says both changes have dented domestic participation. Ashish Nanda, chief digital business officer at Kotak Neo, called Q2 challenging for brokers.
Two swing factors
A recovery may hinge on West Asia and Sebi’s next move. A de-escalation of the conflict could revive activity. Any delay to CAS rules on weekly expiry days could also help.
DK Aggarwal is chairman and managing director of SMC Capitals. He expects Sebi to defer CAS on weekly expiry days for a year. It would stay on non-expiry days, he said. Absent derivatives traders would then return, lifting volumes, he believes. He also sees cash volumes improving if crude holds at or below $100.
S.K. Joshi, consultant at Khambatta Securities, is more cautious. He expects options turnover to pick up. But higher volatility could keep cash volumes subdued, he warned.
Waiting for a trigger
The slowdown reflects more than one weak quarter for stocks. Global pressures and domestic reforms hit the market together. Options activity may recover faster if regulatory friction eases. Cash trading may need a broader lift in sentiment. Neither outcome is assured.
