The recent spike in market volatility is leaving investors averse to taking long-term positions. The data from the past 12 months shows that of the total shares traded, investors took delivery for 33 per cent of the traded volume.
Investors tend to seek delivery for those stocks in which they see a long-term investment opportunity or tactical positional trade.
Off late, taking new bets has been difficult for investors as market conditions have remained weak. Market participants attributed the fall in delivery share to battering of stocks in the mid- and small-cap space. The BSE mid-cap fell 13 per cent in 2018, and the small-cap index fell 24 per cent in the same period.
“The underperformance of mid- and small-cap securities had a bearing on retail investor participation, particularly in the cash segment, with the investors yet to recoup their losses.
The decline in delivery volumes in the cash segment also points towards the growing shift to trading as opposed to investment-oriented transactions,” said Samriddhi Chowdhary, vice-president and co-head, financial sector ratings, ICRA.
Some market participants said cash delivery would improve once the market conditions stabilise.
“Right now, we are in a bearish market, so the investor interest is low. Delivery volumes tend to remain tepid in such conditions. Investors would typically wait till their existing investments turn profitable, before taking fresh bets,” said Ashish Rathi, whole-time director, HDFC Securities.
Experts are also of the view the growing popularity of the derivatives market has weaned away the volumes from the cash market. They said investors preferred the derivatives market as they could take larger exposures there.
“The leverage provided by the cash market is not helping the volumes. The percentage of cash-segment transactions has come down over the years. At the same time, trading-oriented products are seeing higher investor demand,” said Kamlesh Rao, managing director and chief executive officer of Kotak Securities.