Share delivery volumes up with market rise

However, retail participation remains well below expectation, with many seem to be waiting for a perceived opportunity to enter

Delivery volumes in shares have seen a steady increase this year, with equities up sharply on renewed hope of an economic recovery.

Delivery volumes — meaning taking actual delivery of shares — in the average month were 45 per cent of the total volumes as against 42 per cent last year.

“Delivery volumes are up as we have seen higher participation by investors, particularly those of the high net worth 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.

The daily average cash turnover rose 54 per cent this year, to Rs 3,159 crore.

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

The stock markets have risen 40 per cent this year but those in the sector are unenthused at the extent of retail participation. The slow trickle of this segment of small individual investors, seen at the beginning of the year, is yet to become a steady flowing stream of investments from this category.

Brokers and market analysts said the anticipation in the market about the return of the retail investor has not met expectations, thanks to the scars left by the past five to 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, 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 many of these were still inactive, waiting for a dip in prices to enter the market. Data from NSDL and CDSL show a little over 1.1 million accounts have been added this year.

While enquiries continue to pour in, these are not necessarily getting translated into active market participation, brokerage officials said.

“The rally this year has generated higher retail participation than last year but 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, as indicated by its head, Raghuram Rajan, in his policy statement last week, could be one such trigger, brokerage officials said.

Many banks have already lowered their rates in anticipation of a rate cut next year. A cut by RBI could set free investment for equities, as clients could then churn their portfolio in this direction, analysts said.