BackTop 20 cities still account for bulk of equity turnover
Signs emerge of rising penetration beyond big cities; share of smaller towns pegged at 21.6% for BSE, 9.5% for NSE
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Mumbai: The share of the Top 20 cities in the total cash market turnover on BSE and the National Stock Exchange (NSE) still remains in the range of 80-90% with Mumbai still accounting for half the turnover, even as there are some signs of increased penetration of equity investing as seen in the spread of demat accounts.
According to data maintained by the Securities and Exchange Board of India (Sebi), Mumbai still accounts for more than half of the total cash market turnover, with cities such as Ahmedabad, Bangalore, Delhi, Hyderabad, Rajkot and Kolkata also contributing a sizeable chunk.
Mumbai’s share in the turnover pie is also driven by the fact that most of the computer-driven algorithmic trading along with big-ticket institutional trades originate from the financial capital.
The share of towns beyond the Top 20 cities is pegged at 21.6% for BSE and only 9.5% on NSE, according to Sebi data for the month of July. Sebi sources the data from the stock exchanges.
Ravi Varanasi, chief (business development), NSE, says the numbers would be skewed towards large cities as most large institutional investors are based in either Mumbai or the other metropolitan cities.
“Activity from cities like Mumbai or Delhi would include the likes of large institutional players, both domestic and FIIs (foreign institutional investors) and so if you look at the percentage share of cities, then the largest cities will only figure. A person from, say Nagaland, will put only a small trade and so it will not add up in the percentage of volume. But, on a stand-alone basis, they add to a significant chunk," says Varanasi.
To be sure, while trading remains centred in Mumbai, the share of Mumbai in the total number of demat accounts has been on a decline. Mumbai accounted for 12.11% of all demat accounts in 2006, which has now come down to 8.83%, as per National Securities Depository Ltd (NSDL).
Indeed, the number of active demat accounts from cities such as Kochi, Pune and Lucknow has witnessed a significant jump in the last four years, according to NSDL. While the number of demat accounts in many cities has risen in the last few years, those still constitute a minor part of the total number of accounts in the country.
“Generally, there is a belief that investors flock during rising index and go away when markets start falling. This is not true as is evident from the continuous growth from 2006 to 2010 and from 2010 to 2014. The growth rate has declined but the growth as such is there and is steady," said G.V. Nageswara Rao, managing director and chief executive officer, NSDL. Rao attributes the surge in numbers to efforts put in by market intermediaries to educate investors about the benefits of the equity market.
Also, according to NSE, the number of investors trading from cities beyond the Top 100 (based on retail turnover) increased 30% from 466,000 clients in the first quarter of 2013-14 to 606,000 clients in first quarter of 2014-15. Further, the daily average retail turnover from cities beyond the Top 100 increased nearly 93% to ₹ 2,620 crore in the same period.
BSE, which is Asia’s oldest stock exchange, conducted a total of 2,578 investor awareness programmes during 2013-14, in which nearly 240,000 persons participated. Along with Sebi, the exchange organized more than 120 regional seminars across India, including in cities such as Shillong and Srinagar in the last three years.
While the absolute number of active demat accounts has grown in tier-II and tier-III cities, it is difficult to say if such investors actively trade in the market. Many retail investors burnt their fingers in the market in the period after 2008 and the absence of a buoyant primary market also delayed their return. According to Prime Database, which compiles data related to public issues, fund raising by way of initial public offerings (IPOs) hit a 10-year low in 2013-14 as only ₹ 1,205 crore was raised.
This has, however, not affected the optimism shared by some of the market intermediaries who operate in the so-called non-metropolitan cities.
Vinayak Pattar, who owns a franchisee of Angel Broking in Karnataka’s Belgaum district, says that equity culture is on the rise and with markets touching new highs, newer investors are looking at entering the market.
“People have money and brokerages and stock exchanges only have to create more awareness to bring them to the market. We regularly conduct seminars and there are a lot of high net-worth individuals who believe in investing for the long-term. Active traders are also present and every week sees a few new accounts being opened," says the 30-year-old Pattar.
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