Trading activity in April reflected a sharp divergence, with cash market turnover rising 7 per cent, supported by a strong rebound in equities, while the hike in the securities transaction tax (STT) led to a 6 per cent decline in derivatives turnover.

From April 1, the STT on futures was increased to 0.05 per cent from 0.02 per cent, while for options, it went up to 0.15 per cent from 0.1 per cent.

The average daily turnover (ADTV) for the cash segment rose to a near two-year high of ₹1.44 trillion during the month, tracking a broad-based rally in equities. Benchmark indices staged their strongest monthly recovery in over a year, with the Sensex gaining 6.9 per cent and the Nifty advancing 7.5 per cent — their best performance since December 2023. This follows a steep correction in March, when the indices had declined over 11 per cent, marking their worst fall since the pandemic-led sell-off of March 2020.

The rally was even more pronounced in the broader markets. The Nifty Midcap 100 climbed 13.6 per cent — its best showing since November 2020 — while the Nifty Smallcap 100 surged 18.4 per cent, the highest since May 2014.

“Cash segment has more of a floating investor base, while derivative trading is more the domain of seasoned investors. The rise in cash volumes is largely due to better market performance. Both the benchmark and broader indices posted their best gains in many months in April, following the March slump. These gains likely persuaded more investors to return to cash markets to take fresh bets or cut losses,” said Satish Menon, executive director at Geojit Financial Services.

The ADTV segment stood at ₹486 trillion, down nearly 18 per cent compared to January level of ₹592 trillion. Brokers attributed the weakness in derivatives to elevated volatility, changes in taxation, and tighter regulations.

“In derivatives, it is the impact of STT going up. The impact of the STT hike will be more on algo traders. And the impact of RBI’s capital exposure norms, though deferred by three months, is being felt in derivative trading. Brokers earlier took bank guarantees and provided leverage to traders in proprietary trading. Now, the funds available to distribute will decrease, and the cost will increase. The liquidity for traders will go down,” said Prakarsh Gagdani, founder of Soaring Peaks Capital.

Amid the softness in derivatives volumes, BSE continued to expand its market share in the segment. The exchange’s notional market share crossed the 50 per cent mark for the first time during the month.

“For traders, the underlying can be anything; what they need is volatility, depth, and volume. It’s not just BSE; even MCX turnover is picking up. The frequency of weekly expiries has decreased, and people now have fewer opportunities to trade. That’s the reason you see volumes shifting to BSE,” said Gagdani.

The decline in investor participation is also visible in exchange data. The NSE’s active client base shrank by 3.5 million to 45.2 million in FY26, indicating a pullback from smaller traders who had been key drivers of derivatives volumes in recent years. Also, the number of derivatives contracts traded has come off sharply following the market regulator’s move to tighten the derivatives trading rules, which includes limiting weekly expiries to just two days.

Market participants said that while cash volumes could remain supported if the rally sustains, a meaningful revival in derivatives activity would require both lower volatility and a return of retail risk appetite.

“For derivative trading, the current quarter will be challenging due to regulatory changes. Cash markets will be driven by geopolitical changes, earnings, and how the monsoon pans out. Maybe things will start picking up from the third quarter,” said Gagdani.