Indian equity markets demonstrated exceptional trading activity in June, with cash market turnover on the NSE reaching a 23-month high of ₹27.7 lakh crore, representing an increase from ₹26.9 lakh crore in May, according to The Economic Times report. However, recent data from CareEdge Ratings reveals that cash market average daily turnover fell 6.7% from May after increasing for three straight months, indicating a moderation in trading activity despite the record monthly turnover. This surge in trading volume during the month was accompanied by unprecedented retail investor leverage levels.
Retail investors are entering the stock market with record levels of borrowed money, with the average Margin Trading Facility (MTF) book climbing 57.6% year-on-year to an all-time high of ₹1.36 lakh crore in June, according to CareEdge Ratings. The MTF book has expanded consistently over recent months, rising from ₹1.13 lakh crore in March to ₹1.14 lakh crore in April, ₹1.27 lakh crore in May and finally ₹1.36 lakh crore in June. In comparison, it stood at ₹0.86 lakh crore a year ago. CareEdge noted that the rise in leveraged positions reflects continued investor confidence, but warned that a sharp increase in market volatility could put these positions under pressure if stock prices reverse.
A notable development in the cash market was the proprietary traders' share of turnover decreasing to a six-month low of 33%, suggesting a broader participation base across investor categories. As reported by The Economic Times, this decrease indicates that the market is becoming more diversified beyond traditional proprietary trading firms, with participation spreading across different investor segments. The NSE continued to dominate the MTF segment with more than 96% of total MTF volumes, while the BSE posted faster annual growth on a much smaller base.
In the derivatives segment, foreign investors strengthened their presence in equity futures, with their share rising to a record high of 31.5% in June, allowing them to retain the top position for a third consecutive month, according to The Economic Times report. Domestic institutional investors also increased their share to 13.8%, demonstrating growing institutional participation in futures trading. The MTF book has expanded consistently over recent months, rising from ₹1.13 lakh crore in March to ₹1.14 lakh crore in April, ₹1.27 lakh crore in May and finally ₹1.36 lakh crore in June.
CareEdge attributed the decline in cash market turnover to profit booking, limited fresh market triggers and cautious investor sentiment amid geopolitical tensions and global economic uncertainty. The combination of record leverage and slowing cash market momentum could become a concern if markets witness a sharp correction. The Reserve Bank of India's revised liquidity framework, which came into effect in July, may also influence trading activity by increasing brokers' working-capital requirements. Despite near-term risks, CareEdge expects rising retail participation and wider adoption of MTF to support long-term growth in the market.
