Delivery-based volumes near a year's high

Average monthly stock delivery volumes on the BSE, NSE have risen to 45.5% in Feb, the highest since March 2013

Amid expectations that a new government at the Centre will push key reforms to revive economic growth and improve the fortunes of India Inc, the markets have seen a steady rise since February.

The overall positive sentiment has seen delivery-based volumes on the BSE and the National Stock Exchange (NSE) rise to a year’s high. According to the latest data available with the exchanges, the delivery ratio---the percentage of shares actually changing hands in relation to the total traded quantity — was about 50 per cent in February.

The average monthly stock delivery volumes on BSE and the NSE rose to 45.5 per cent in February, the highest since March 2013 (45.8 per cent). According to data compiled by Business Standard Research Bureau, it stood at 50.3 per cent in August 2005.

In the past six months, average delivery volumes surged about 400 basis points, compared with 40.8 per cent in August 2013, after the Reserve Bank of India took steps to ease liquidity. During this period, the benchmark indices — the S&P BSE Sensex and the CNX Nifty — have gained 13.4 per cent and 14.7 per cent, respectively.

Of the 9,543 million shares on the NSE, 2,785 million, or 29.2 per cent, were converted into deliveries in February, against 27.7 per cent in January.

“A rise in volumes reflects an increase in participation; the incremental volume is also coming from the B2 segment, in which scrips are unavailable for trade in the derivatives segment. Since participation has increased, delivery volumes have also seen an up-move. Delivery volumes could remain around current levels,” said Rikesh Parikh, vice-president (equities), Motilal Oswal Securities.

Usually, delivery-based trading is considered a safer approach for trading in shares compared to day-trading; it involves buying shares on a market day and selling those only after receiving the delivery of the shares in the demat account.

“Besides positive global cues, the rally has been supported by domestic factors such as a stronger rupee and the other economic data. Expecting the beginning of a fresh bull run in our markets, traders and investors are buying. In my view, this is the reason for the rise in delivery, as well as trading volumes. This momentum is likely to continue,” said Chandan Taparia, derivatives analyst (equity research), Anand Rathi.

Top draw
Anticipating an economic revival after the coming Lok Sabha elections, sectors such as capital goods, primarily electrical equipment, telecom services providers, infrastructure, entertainment, and fertilisers, have seen a rise in the average monthly delivery volumes.

“Investors have been taking interest in the stocks of beaten-down segments. This suggests momentum in these stocks. So, the price action seen in these counters has been converted into delivery trade. Though the markets will remain volatile ahead of the elections, investors are buying stocks based on opinion polls that indicate the formation of a stable government,” said Parikh of Motilal Oswal.

Taparia said, “Among capital goods stocks, we like Havells India, Larsen & Toubro, Siemens, Bhel, etc. Though we are cautious on the telecom space, we like Idea Cellular, given the derivatives data. ICICI Bank, YES Bank, IndusInd Bank and IDFC still have some upside left. However, one should avoid metal stocks for now. Among pharmaceutical counters, Divi’s Laboratories, Dr Reddy’s Laboratories and Aurobindo Pharma look strong despite the up-move.”