NSE equity option trades record 134 per cent growth; Investor base zooms to 8 crore!

The nation's market capitalization exceeded USD 4 trillion, securing India's global standing as the 4th largest in terms of market capitalization.

The National Stock Exchange (NSE) has achieved remarkable milestones and demonstrated robust market performances in the financial year 2023. As of September 2023, the NSE boasts an impressive investor base of 8 crore, a testament to its growing influence in the financial landscape. Over the past eight months, the investor base witnessed a substantial increase from 7 crore to 8 crore, showcasing NSE's ability to attract and retain a diverse pool of investors.

Milestones

• The nation's market capitalization exceeded USD 4 trillion, securing India's global standing as the 4th largest in terms of market capitalization.
• The Nifty50 index reached 20,000 on September 11, 2023, and further ascended to 21,000 on December 8, 2023, marking substantial milestones in the stock market.
• As of November-end in CY23, there is a notable 73.7 per cent global share in the number of contracts traded in equity derivatives, showcasing the robust performance of Indian markets in this specific financial instrument.
• Demonstrating a commanding position, India commands a 60.5 per cent global share in the number of contracts traded in derivatives across various asset classes as of November-end in CY23.

These achievements underscore the resilience and vibrancy of India's financial markets, positioning the nation as a key player in the global economic landscape.

Market Performance: A Thriving Landscape

Indian stock markets soared in 2023, delivering impressive returns across Major indices. The benchmark Nifty 50 rallied by a remarkable 17.9 per cent, closing the year at 21,349. The broader Nifty 500 did even better, surging 23.3 per cent to reach 19,055. But the real stars were the Mid-Cap and Small-Cap segments, with the Nifty Mid-cap 50 and Nifty Small-cap 50 skyrocketing by 46.7 per cent and 60.5 per cent, respectively. This highlights the growing vibrancy and potential for higher returns in smaller companies.

This stellar performance was mirrored in the overall market capitalization. NSE's market cap reached a staggering Rs 35,349,697 crore by December 25, a hefty 26 per cent increase compared to the previous year-end. This growth further underlines India's economic strength and the increasing allure of its capital markets for investors. Notably, the market cap-to-GDP ratio also jumped by 10 percentage points, indicating a closer alignment between stock market valuation and the wider economy.

Trading Activity

In terms of global market ranking, NSE stood tall in 2023. India's market capitalisation secured the 4th position, a testament to the nation's economic strength and investor confidence. When it comes to trading activity, NSE reigned supreme in the derivatives arena. It claimed the top spot for both equity derivatives (a staggering 73.7 per cent global share) and currency derivatives (64.6 per cent global share). This dominance extends across asset classes, with NSE clinching the 1st position for derivatives trading in general (60.5 per cent global share). These figures paint a clear picture of NSE's pivotal role in facilitating global financial transactions.

Fund mobilisation

Despite a marginal 2 per cent decrease from 2022, the total fund mobilization in 2023 stood strong at Rs 13,06,090 crore, underscoring the enduring resilience and allure of the Indian capital markets for businesses in pursuit of growth capital.

• In the equity domain, Main Board IPO volumes experienced a 24 per cent dip, whereas the NSE Emerge platform, dedicated to smaller enterprises, saw a noteworthy 175 per cent surge in fundraising.
• Follow-on issues, including rights offerings, preferential allotments, and QIPs, exhibited a robust investor appetite, with QIPs witnessing an impressive 513 per cent increase.
• Secondary market transactions through OFS increased by 44 per cent, indicating active participation from existing shareholders. Business trusts, comprising InvITs and REITs, experienced substantial fundraising growth, with InvITs rising by 307 per cent and REITs by an even more remarkable 522 per cent.
• In the debt market, Commercial Papers (CPs) saw a 20 per cent decline, while Private NCDs increased by 20 per cent and Public NCDs more than doubled.

Market Turnover and Trades:

Despite some declines in specific segments, NSE's overall trading activity remained robust in 2023, reflecting the continued vibrancy of Indian financial markets.

• The Cash Market exhibited a robust performance, witnessing a 9 per cent increase in trades, along with a substantial 13 per cent rise in total turnover and a notable 16 per cent surge in average daily turnover. This points to a growing investor engagement in direct stock transactions.
• Equity Options experienced a remarkable surge, with trades soaring by 134 per cent, while total turnover and average daily turnover rose by 30 per cent, underlining the escalating popularity of options for risk management and speculative trading.
• Conversely, Equity Futures saw a modest decline of 9 per cent in trades and 5 per cent in both total turnover and average daily turnover, potentially influenced by market volatility or shifting investor preferences.
• Currency Options showed a mixed trend with a 16 per cent increase in trades but a 15 per cent and 12 per cent decline in total turnover and average daily turnover, respectively.
• In contrast, Currency Futures faced a more pronounced decrease of 26 per cent in trades and a 22 per cent decline in both total turnover and average daily turnover, suggesting a potential shift in investor focus.
• Notably, while commodity options experienced reduced trading activity, commodity futures witnessed a significant uptick, albeit in segments with smaller overall volumes compared to equity and currency markets.

Individual Investors and Flows:

Individual investors play a crucial role in NSE's ecosystem. As compared to CY22 The CY23 data reveals a slight decrease of -0.4 per cent in the number of individual investors in the Cash Market segment. However, there is a substantial increase of 30.9 per cent in both Equity and Currency Derivatives segments, showcasing a growing interest in these financial instruments.

In terms of flows, Foreign Institutional Investors (FIIs), Domestic Institutional Investors (DIIs), and Individual Investors have made notable contributions to the market.

State-wise Registered Investors:

The state-wise distribution of registered investors reflects a nationwide participation in the financial markets. Maharashtra leads the pack with a 16.9 per cent increase in registered investors, followed by Uttar Pradesh and Gujarat. The addition of nearly 1.57 crore new investors in 2023 demonstrates the widespread adoption of financial instruments across the country.

In conclusion, NSE's journey in 2023 has been marked by significant achievements, robust market performances, and a global dominance in derivatives trading. These milestones not only attest to NSE's resilience and adaptability but also position it as a key player in the global financial landscape.

Disclaimer: The article is for informational purposes only and not investment advice.