Investment patterns have undergone behavioural changes during the financial year, with market volatility unnerving investors.

Cash turnover on the National Stock Exchange (NSE), which dominates the sector, plunged nearly 20% in fiscal 2023, the biggest drop in 11 years since a 21.4% slide in fiscal 2012. Cash turnover on the Bombay Stock Exchange (BSE) fell 23.1%, and the combined cash market on both exchanges fell 19.9%.

More and more investors are attracted to options exchanges, a cash cow for exchanges. According to the exchange, NSE also has a de facto monopoly in the equity F&O space.

In FY23, NSE’s cash market turnover was Rs 133 trillion, while the average daily turnover was Rs 53,434 crore, down 20% from FY22 after six consecutive years of growth. NSE has a 92.8% share in the spot market.

In contrast, the BSE, which had a mere 7.2% share, was worth only Rs 10.28 trillion, averaging at Rs 4,132 crore, down 23.4% since FY22.

Every month, NSE recorded an average daily turnover of Rs 68,013 crore in April 2022, the highest in FY23; the lowest was Rs 44,608 crore in June 2022. The highest average for FY22 is Rs 81,361 crore in October 2021, and the lowest is Rs 53,597 crore in December 2021.

Analysts said heightened market volatility led investors to shy away from equities and turn to the F&O sector, given limited margin requirements.

Reports from market participants and brokers suggest that options contribute close to 75% of NSE trading revenue, compared to a range of 30-35% previously.

Not only that, a recent study by Sebi revealed that the number of individual traders in the equities F&O space surged 500% to 4.5 million by the end of FY22 from 7.10 lakh in FY19 pre-pandemic. 90% of these individual traders made a net loss.

The data shows that the F&O sector is entirely dominated by NSE, with a market share of 99.1%, while BSE only accounts for 0.9%.

NSE’s total turnover in the sector stood at Rs 38,222 trillion, up 125.5% in FY23, following a 575% increase in FY22 compared to FY21. The average daily turnover was Rs 153.5 trillion, up 125.6% since FY22.

Over the past two fiscal years, foreign institutional investors have withdrawn $23 billion. While foreign investors withdrew $6 billion in the last fiscal year, they will withdraw much more, at $17 billion, in fiscal 2022.