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May – a weaker month

Exchange volumes witnessed a sequential dip in May’22. Dip in equity cash/ futures volumes could have been due to implementation of new norms for segregation and monitoring of collateral at client-side w.e.f. 6th May’22 and overall lower market levels. However, flat options volumes came as a surprise considering volatility index remained high for major part of May’22. MCX reported flat growth in its futures ADTV and sharp sequential growth in options ADTV, which was aided by strong recovery in gold/crude volumes. CDSL added 2.1mn accounts in May’22 vs 2.04mn in Apr’22, but lower than the monthly average of 2.6mn accounts added between Dec’21-Mar’22. Angelone reported 3.4% MoM decline in average daily number of orders traded in May’22

* Equity cash ADTV fell 16% in May’22: In May’22, NSE’s ADTV declined 15% MoM to Rs577bn while that of BSE shrank 21% MoM to Rs42bn. NSE’s market share stood at 93.2% in May’22 vs 92.8% in Apr’22.

* Equity derivatives was almost flat in NSE, but dipped sharply for BSE. NSE options ADTV contracted marginally in May’22 (despite the volatility index rising 26% between 2nd May and 26th May’22). The reason could be overall lower market levels as the number of option contracts traded still rose 18% MoM in May’22. NSE futures dipped 8% MoM to Rs1.2trn. BSE options declined sharply 91% MoM.

* MCX reported 1% MoM growth in futures volumes. MCX’s adjusted-ADTV (futures +1/3 options) grew 4% in May’22 to Rs322bn. MCX futures ADTV grew 1% due to growth in gold/natural gas volumes offset by decline in crude volumes. MCX options volumes rose sharply by 15% MoM. MCX options ADTV stood at Rs200bn in May’22, up 15% MoM. Growth in options was on account of gold ADTV, which came in at Rs17bn vs Rs7bn. Crude options ADTV at Rs149bn, up 15% MoM, still commands a domination position in options ADTV while natural gas options volumes dipped 4% MoM to Rs34bn.

* Currency derivatives ADTV dipped 17% in May’22; NSE gained market share. Volumes dropped sequentially for NSE by 15% while BSE witnessed ADTV decline of 26%. NSE’s market share improved from 82% in Apr’22 to 84% in May’22.

* MF trading: BSE maintained its dominant market share. Number of orders processed on BSE/NSE MF platforms grew 79%/39% YoY to 20mn/3.6mn respectively, in May’22. This implies 87% market share in the number of orders processed and 70% in terms of value in May’22 for BSE.

* Depositories: CDSL demat accounts grew 3% MoM to 67mn in May’22. CDSL’s market share stood at 70.6% in terms of total demat accounts as of Apr’21 and 84% in terms of incremental accounts added in Apr’22.

Key monitorables:

* BSE almost entirely lost derivatives volumes in May22. Was it due to withdrawal of liquidity enhancement schemes? Will it be able to regain the derivatives volumes?

* Will the impact of segregation and monitoring of collateral at client-level in cash/futures be structural, or will it unwind over the next few months?

* Will the impact of market slowdown also lead to lower number of orders, which can impact the revenue of discount brokerages?

* Options volumes have increased for MCX. However, the aggregate volumes for MCX as a combination of futures and options are not very high considering the overall volatility in commodities. We measure the aggregate volumes as adjusted ADTV (futures +1/3 options). This number was Rs322bn in May’22 compared to Rs289bn in FY22. Increase in commodity options remains one of the key investment thesis of MCX.

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