Indian benchmark indices have posted impressive gains, with the Sensex climbing 6.5% and the Nifty rising 7% since the beginning of March. Broader markets have outshoned the benchmarks, as the BSE Midcap and Smallcap indices surged by 9.8% and 11.1%, respectively. However, despite this sharp rally, investor participation in the cash segment has remained muted, highlighting a cautious market sentiment.
Modest Turnover Amidst Strong Market Gains
The average daily cash turnover for March across BSE and NSE stands at approximately ₹1 lakh crore, marking only a marginal 3% increase over the previous month. This limited growth signals that investor confidence remains tepid. In fact, cash market turnover is still down 40% from its June 2024 peak, indicating that many traders are hesitant to deploy fresh capital despite the rebound.
The Sensex has gained over 4,000 points, crossing the 78,000 mark, while the Nifty 50 has risen nearly 1,300 points, turning positive for 2025. Yet, the lack of significant turnover reflects investors’ cautious stance, as they remain wary of valuations and broader market conditions.
Lingering Caution Amid Valuation Concerns
Market experts attribute the subdued volumes to concerns over expensive valuations, which could lead to another downturn. Many investors, still reeling from recent portfolio losses, remain reluctant to average out or initiate new long positions. The uncertainty surrounding global market conditions, including potential US tariff hikes and their inflationary impact, has further fueled investor caution.
Mayank Mundhra, FRM-VP Risk & Head Research at Abans Financial Services, noted that global economic instability is keeping market participants on edge, contributing to the lackluster cash volume growth.
Awaiting Key Catalysts: RBI Policy and Q4 Earnings
Investors are now looking ahead to the Reserve Bank of India’s (RBI) bimonthly policy announcement in April, hoping for a potential rate cut that could boost market sentiment. Additionally, the upcoming Q4 FY26 earnings season is expected to be a significant market driver, with corporate performance playing a crucial role in shaping the next leg of the market’s direction.
Muted FII Activity and Year-End Slowdown
Some market experts suggest that the slight increase in turnover may be due to reduced selling pressure from foreign institutional investors (FIIs). However, they believe a sharp rise in volumes is unlikely. With the financial year drawing to a close, many participants are scaling back activity to finalize their books, further contributing to the subdued turnover.
Outlook: Consolidation Phase Ahead
Kunal V. Parar, Vice President, Technical Research and Algo at Choice Broking, pointed out that the broader market continues to consolidate. He emphasized that the next decisive move will hinge on a combination of factors, including corporate earnings, FII activity, and technical indicators.
As investors navigate this period of caution, the market’s direction will likely be shaped by upcoming domestic policy decisions and global economic trends.
