NSE turnover slides to two-year low as investors weigh uncertain returns

Mumbai: Investor interest in shares is the most subdued in nearly two years as heightened uncertainty over returns from small-cap and mid-cap stocks has prompted participants to scale back trading. In December so far, the average daily turnover of equity market trades on the NSE was at ₹90,076 crore - the lowest since November 2023 - compared with ₹1,04,576 crore in November and ₹98,740 crore in October. In November 2023, the turnover stood at ₹70,615 crore. The decline in trading activity came even as the Sensex and Nifty hit an all-time high on December 1. Since those peaks, both the Nifty and the Sensex are down around 2% each. "Despite benchmark indices hitting record highs, many investors aren't making money as mid and small-cap stocks have significantly underperformed this year. That has reduced churn, with losses translating into lower trading volumes," said Amit Khurana, head of equities at Dolat Capital Market. Domestic institutional investors are absorbing FPI selling, limiting incremental buying activity and, in turn, leading to lower volumes, said Khurana.126028318 The Nifty Midcap 150 has gained 3.9% so far this year but is down 1.6% over the past month. The Nifty Smallcap 250 index is down 8% in 2025 and has fallen 4.4% over the last month. Suresh Shukla, chief business officer at SBI Securities, said retail trading volumes are down nearly 20% YoY because market breadth remains weak due to the underperformance of mid- and small-cap stocks. "Trading volumes have continued to decline due to muted participation from retail investors who have yet to see meaningful gains at the portfolio level," he said. It's not just the retail traders who have cut back on trading. High-net-worth individuals (HNIs) are also looking for greener pastures with trading opportunities on the wane. "We are currently going through one of the least volatile phases seen over the past few quarters, due to which there are fewer money making opportunities for participants, leading to a decline in volumes," said Siddarth Bhamre, head of institutional research at Asit C. Mehta "Along with retail investors and traders, HNIs have also shifted towards other opportunities such as the primary market, where a steady pipeline of IPOs continues to offer probability of making listing gains." Bhamre added that some flows may also have moved into other asset classes as equity traders look for volatility elsewhere. Brokers are feeling the pinch of a drop in trading volumes, which could squeeze their revenues. "November was among the weakest months for brokerages," said Khurana. "The impact of lower volumes was felt across retail investors and traders, high net worth individuals, as well as institutional participants." Shukla expects the third-quarter earnings of brokerages to be softer compared to the second quarter. As FPIs enter the holiday season, domestic flows are likely to drive markets in the near term, while trading volumes early next year will depend on whether foreign investors reallocate capital to India, said Khurana.