Equity trading moderates as cash volume dips, F&O growth slows in FY26

Higher STT, RBI rule tightening may continue to weigh on volumes this fiscal; higher STT seen further boosting options trading

Market performance also remained a drag, with the Nifty50 declining 5.1 per cent and the Sensex falling 7.1 per cent during FY26

Khushboo Tiwari Mumbai

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Domestic equities trading activity moderated in the financial year 2025–26 (FY26), with a decline in cash market turnover and subdued growth in derivatives, as regulatory tightening and weak market performance weighed on volumes.

How did cash and derivatives volumes perform?

Average daily turnover (ADTV) in the equity cash segment across the National Stock Exchange (NSE) and BSE fell 6 per cent year-on-year (Y-o-Y) to ₹1.13 trillion, down from ₹1.21 trillion in FY25.

In contrast, combined ADTV in the futures and options (F&O) segment rose a modest 4.6 per cent to ₹447 trillion. However, activity on the NSE showed signs of strain, with F&O turnover declining 18 per cent.

What factors weighed on trading activity?

A series of regulatory changes over the past 18 months—including the one-exchange-one weekly expiry framework, stricter upfront margin requirements and higher lot sizes—have dampened derivatives participation.

Market performance also remained a drag, with the Nifty50 declining 5.1 per cent and the Sensex falling 7.1 per cent during FY26.

Industry participants do not rule out further softening in volumes in the current fiscal.

Is there a shift in trading behaviour?

Despite lower volumes, average trade sizes increased across exchanges, indicating a shift towards higher-value transactions.

On the NSE, average trade size rose to ₹31,545 from ₹29,046 a year earlier, while on the BSE it increased to ₹22,822 from ₹18,720.

BSE also emerged as a relative gainer, with its notional market share rising from 38 per cent in September 2025 to 44 per cent in March 2026, according to HDFC Securities.

How will RBI norms affect volumes?

Market participants are now focused on upcoming changes from the Reserve Bank of India (RBI), particularly revised norms on bank guarantees effective July 1, which could tighten leverage.

Nearly 35 per cent of industry margins are backed by fixed deposits and bank guarantees.

“Assuming half of these are pure bank guarantees and applying a 50 per cent impact, the resulting effect on derivatives volumes is estimated at about 8–10 per cent,” HDFC Securities said.

Devesh Agarwal, vice-president at IIFL Capital, said volumes could fall 10–15 per cent in the near term as leverage reduces, with adjustments playing out over six to nine months.

What is the impact of the STT hike?

The increase in securities transaction tax (STT) on derivatives is also expected to influence trading patterns.

STT on futures has been raised from 0.02 per cent to 0.05 per cent of traded value, while the tax on options premium has increased from 0.1 per cent to 0.15 per cent.

“In futures, around 40 per cent of trading costs are attributable to STT, compared with 8–9 per cent in options… this could drive a shift towards options,” said Amit Chandra of HDFC Securities.

Analysts noted that while options volumes have historically remained resilient to tax increases, futures trading could see a sharper decline, accelerating the shift in market activity.

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First Published: Apr 02 2026 | 9:45 AM IST