Indian Equity Markets: Up Against the Tide?

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10 October 2013


The Indian economy has struggled in the course of 2012-2013. Some of the factors that have led to lethargic performance by the Indian equity markets include a fall in economic growth, a sharp rise in inflation, and a steep decline in the currency exchange rate.

In the report Indian Equity Markets: Up Against the Tide?, Celent analyzes the recent performance of the Indian cash and derivatives equity markets. In spite of a tough year for the country, its leading exchange, National Stock Exchange (NSE), seems to have weathered the crisis well. It became the third largest derivatives exchange in the world in 2012. While it has experienced a fall in its trading volumes in 2012, its decline was less than some of the other leading exchanges.

The estimated average daily turnover, the number of trades for index options, and the number of trades for stock options are all expected to rise in FY 2014 (April 2013 to March 2014). It seems that the derivatives market has benefitted from the recent uncertainty and continued the excellent growth that has made NSE the third largest derivatives exchange globally.

“The index options at NSE have become its leading derivatives product and are the second largest derivatives product by volume across global exchanges,” says Dr. Anshuman Jaswal, Senior Analyst with Celent’s Securities & Investments Group and author of the report. “Their performance is one of the main reasons NSE has been able to weather a difficult national and global economic environment and is well placed fundamentally to continue the progress made over the last few years.”

This report discusses the recent performance of NSE’s equity markets, beginning with a look at the various parameters of the cash equity markets, including the turnover, volumes, market concentration, market capitalization, and number of securities traded. After this, we discuss the equity derivatives markets at NSE. A comparison is made of growth of the different products, such as index futures and stock futures, and index options and stock options, with some expected to grow much more than others.