Delivery volumes up in 2014 as markets rise

But retail participation remains below expectations - analysts

Delivery volumes this year have seen a steady rise as equities rose sharply in 2014 on renewed hopes of an economic recovery. Investor-participation this year was much better than last year as average monthly delivery volumes accounted for around 45 per cent of delivery volumes as against 42 per cent last year.

"Delivery volumes are up this year as we have seen higher participation by investors, particularly those of the high networth category than absolute retail. It is an encouraging sign and volumes are expected to go higher as investments and earnings start to see a pick-up," said Sudhakar Ramasubramanian, managing director, Aditya Birla Money.

Delivery volumes are also up on the back of increased valuations in the mid- and small-cap sector.

So far this year, stock markets have surged about 40 per cent this year but industry players remain unenthused by the extent of retail participation. The slow trickle of retail investors seen at the beginning of the year is yet to become a steady flowing stream of investments from this category of small individual investors.

Brokers and market analysts said that the anticipation and hype in the market about the return of the retail investor has not met expectations, thanks to the scars left behind by the last five-six years.

"The large-scale wider participation by the retail investor that was expected at the start of the year has still not happened. Delivery volumes have gone up but that is also largely because of the rise in market valuations and the activity of existing clients," said Satish Menon, executive director, Geojit BNP Paribas Financial Services.

Most of the traction has been in the accounts of already existing clients who were seen booking profits during April and May after share prices rose sharply in anticipation of a favourable election outcome in May.

Data from NSDL and CDSL point to an increase in the number of demat accounts but brokerages said that many of them were still inactive waiting for a dip in prices to enter the market. As per data from NSDL and CDSL, over 11 lakh accounts have been added so far this year.

Investors are still waiting on the sidelines looking for an opportune time to start investing. While enquiries continue to pour in, these are not necessarily getting translated into active market participation.

"The rally this year has generated higher retail participation than last year but it is still nowhere close to what we had seen in 2007-08. People are waiting for a meaningful correction or trigger to enter the market. Instead they should just start investing on a regular basis and stop trying to time the market," said Ketan Karkhanis, senior vice-president at ICICI Securities.

An interest-rate cut by the Reserve Bank of India (RBI) as indicated by the RBI Governor Raghuram Rajan in his policy statement last week could be one such trigger, brokerage officials said.

While many banks have already lowered rates in anticipation of a rate-cut next year, a rate-cut by the RBI could free up investments for equities as clients could then churn their portfolio in favour of equities, analysts said.