Broker and Exchange stocks tumble as trading volumes slip

Synopsis

The combined average daily trading volume in the equity segment of BSE and NSE fell 13% in February - a 15-month low - over the previous month in the wake of the slump in the stock market. It dropped 44% compared to the average turnover in 2024.

Mumbai: Shares of capital market-oriented companies were among the top losers on the exchanges on Monday amid growing concerns over the impact of lower trading volumes, in both cash and derivatives, on their earnings.

Angel One shares were the top loser at 8.8%. IIFL Capital Services fell 7.4%, while Nuvama Wealth Management and BSE dropped about 6% each.

The combined average daily trading volume in the equity segment of BSE and NSE fell 13% in February - a 15-month low - over the previous month in the wake of the slump in the stock market. It dropped 44% compared to the average turnover in 2024.

In derivatives, the turnover in options - the most popular instrument among retail traders - declined 2% from the previous month and was down 48% from 2024's average volumes. Options turnover in February at ₹187 lakh crore is at its lowest level in 27 months.

Agencies

The recent proposal by the Securities and Exchange Board of India (Sebi) to tighten the way outstanding positions in stock futures and options are calculated, in an attempt to reduce the possibility of manipulation in derivatives trading, is also expected to reduce trading activity.

Brokerage Goldman Sachs cut its price target for BSE to ₹4,880 from ₹5,650 while maintaining a "neutral" rating following the Sebi's plan. The brokerage said Sebi's consultation paper to curb market volatility could impact the exchange's earnings. "The bigger aim in our view is to reduce undue volatility in the equity markets which doesn't bode well for an exchange where options trading accounts for around half of the top-line," said the client note.

Nearly 70% of BSE's derivatives ADT (average daily turnover) comes from proprietary traders, whose activity could be curtailed by these proposed changes and monitoring of position limits, said Goldman.

"The fortune of the broking industry is directly related to the secondary market performance, and as markets have been going through downtrend since peaking in September last year, we have seen a significant impact on the trading volumes," said Arijit Malakar, equity research analyst at Ashika Stock Broking. "Along with this, regulatory tightening by Sebi to curb futures and options trading has also impacted revenues of brokers and exchanges."

The regulator discontinued the weekly expiries of non-benchmark indices - Bank Nifty and Bankex - since November last year, which contributed significantly to the earnings of both brokers and exchanges.

"Discount brokers like Angel One would have a larger dependence on such volumes and have fallen more than other companies which may be more diversified," said Hemang Jani, director at Finazenn. "Exchanges like BSE and MCX also get impacted due to lesser revenues from transaction costs, which is a major chunk of their earnings."

Shares of Angel One have declined 32.5% this year, whereas IIFL Capital Services and Motilal Oswal Financial Services fell 39-40%. BSE is down 18% and MCX shed 24% in 2025.

Malakar also said that until traders regain confidence, the tide may not turn for these stocks. The primary market slowdown has also led to a revenue decline for the exchanges, he said.

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