Amid market weakness, delivery-based trades hit an 11-month high in March

Among sectors, stocks of banks, cement, chemicals, engineering, agro chemicals, automobiles, fast moving consumer goods (FMCG), sugar, aviation have seen increase in delivery-based trades.

Investors have been lapping up stocks at lower levels, which has not only pushed the indices higher from their recent bottom, but has also seen a steady rise in delivery-based trades. In March, delivery-based volume rose to 11-month high as investors became aggressive and more confident in taking delivery positions after stocks fell like ninepins over past one-and-half months.

The benchmark indices reported their worst performance in more than one decade as coronavirus (Covid-19) – led lockdown across major countries across the globe triggered fears of a recession. The S&P BSE Sensex had tanked 23 per cent in March, its biggest monthly fall since October 2008.

However, the combined average monthly stock delivery volume on the BSE and National Stock Exchange (NSE) have risen to 37.2 per cent in March, the highest since April 2019, when it was at 39.3 per cent. The NSE had reported a record average daily turnover of Rs 47,917 crore during the month, the exchange website data shows.

According to the month-wise data compiled by Business Standard Research Bureau, the delivery ratio---the percentage of shares actually changing hands in relation to the total traded quantity — was about 34.1 in January 2020 and 35.8 per cent in February 2020.

In December 2019, when the market was hovering near its all-time high level, less than one-third (31.3 per cent) of the traded stocks were delivery-based. March typically sees high delivery-based trades on account of financial year closing. In March 2017, this ratio was at an all-time high with 52.6 per cent of the traded shares being converted into delivery. In March 2018, it was 37.9 per cent and 38.5 per cent in March 2019.

 

On the other hand, the standalone delivery-based volumes on the NSE were at eight-month high with 20.51 per cent of the traded stocks turned in delivery, the exchange data shows.

Among sectors, stocks of banks, cement, chemicals, engineering, agro chemicals, automobiles (mainly tractors and commercial vehicles), fast moving consumer goods (FMCG), sugar, aviation, domestic appliances and paints have seen increase in delivery-based trades.

“For every ‘buy’ trade, there has to be a corresponding ‘sell’ trade as well. A number of investors exited their positions in March thinking that the markets will fall given the Covid-19 pandemic, while some became aggressive and bought. Big investors could also have taken position on margin money. That said, it is time to be selective. Among sectors, investors should stay away from banks and autos for now,” says Nandish Shah, derivative analyst at HDFC Securities.

After the sharp rebound from the recent low, analysts now expect the indices to cool off a bit and consolidate. In this backdrop, markets they believe, are likely to remain volatile as they hunt for cues to chart future course.

“Structurally, key point to highlight during past three weeks consolidation is that it has been more time consuming. Any cool-off from here due to elevated global volatility would get anchored around 8,500 levels on the Nifty. Hence, near-term breather towards this level should not be construed as negative, but should be capitalised as an incremental buying opportunity,” says Dharmesh Shah, assistant vice-president for technical research at ICICI Securities.

Delivery-based trades