Ahmedabad, Delhi and Mumbai, which together make up 65% of national volumes, post decline in turnover in 2nd half of 2015.
A spike in volatility is taking a toll on small investors.
Ahmedabad, Delhi, and Mumbai - which together contribute 65-70 per cent to overall market volumes - have posted a decline in cash turnover on the exchanges in the latter half of 2015, indicating waning retail interest.
Between April and November 2015, Ahmedabad's cash turnover declined 1.3 per cent and 0.7 per cent on the BSE and the NSE (National Stock Exchange), respectively, data collated from the Securities and Exchange Board of India (Sebi) show.
Delhi witnessed a decline of 0.9 per cent and 1.4 per cent, respectively.
Mumbai's turnover saw a steep drop of 8.3 per cent on the BSE, but an increase of 0.5 per cent on the NSE.
"Trading activity in the larger cities has come down because of market volatility and decline in retail participation," says Prasanth Prabhakaran, head, retail broking, IIFL.
According to him, retail investors are bulls by nature and their participation comes down drastically when the market tanks or is range-bound.
"Investors that entered at high levels in 2014 or early 2015 are stuck and not bringing in fresh capital," Prabhakaran adds.
During the period, the average daily volumes for retail investors fell 12 per cent on both the exchanges and the benchmark indices slid 6.4 per cent.
Market observers also believe that investors in the key cities have become cautious and are preferring the mutual fund route over direct equities.
Some experts, however, say the decline in turnover in these key centres could mean retail participation across lesser known geographies has increased, reinforcing the notion that retail investors tend to enter the market at peaks.
The rally in mid- and small-cap stocks was instrumental in driving investors from smaller centres to enter the market, say experts.
Traditionally, retail investors put 70-80 per cent of their money in mid-cap stocks, say experts.
According to a recent Morgan Stanley report, of the three calendar years with negative equity returns in the past decade, 2015 is the only one where mid-caps had outperformed large-caps in a falling market.
The BSE Midcap index rose 7.4 per cent in calendar year 2015 (CY15).
"We have constantly reached out to people across India, with an aim to bring more people into the formal financial system. Our attempts will also ensure faster financial inclusion," says Ravi Varanasi, chief of business development at NSE.
The exchange has seen a significant growth in traded value in cities such as Bengaluru (50 per cent), Rajkot (40 per cent), and Gurgaon (30 per cent) in CY15 over the year-ago period.
The BSE, on the other hand, has seen a significant increase in client addition in Telangana (516 per cent), Dadra & Nagar Haveli (40 per cent), and Mizoram (30 per cent).
