Delivery-based trades on the rise

MUMBAI: Amid the pall of gloom, there seems to be some relief. Percnetage of delivery-based trades on the bourses has shown some improvement, and now accounts for over 30% of all trades. Yet, market observers feel it is hardly any cause for celebration. They attribute the trend to a sharp rise in selling by foreign institutional investors, and an overall decline in trading volumes. Real equity investments are becoming elusive even as over 60% of listed companies on the bourses are trading at record lows, and with most experts assuring strong fundamentals and assured future performance. While delivery-based trading has marginally increased in September, a good portion of it comes from FII sell-off, say market observers. Average delivery volumes during September stood at 32%, compared with 27% in June, 33% in March and 37% in January. “The marginal rise in delivery positions in September should not be seen as genuine buying. It could just be an effect of massive off-loading by foreign investors. Even volumes are on the lower side with market makers (jobbers and arbitrageurs) missing from the action,” said Ventura Securities’’ institutional sales head Bharat Shah. According to Mr Shah, there are not many positive triggers for the market. On almost all days since the beginning of this month (until Friday), the market ended lower while more delivery trades were logged. This is negative for the market as it highlights the presence of more sellers in the market. “In such markets, there is only 40% chance that you make money; there is a good 60% chance of making a huge loss. This explains for the absence of speculators in the market,” Mr Shah added. Experts opine that when the market is bullish, the presence of genuine investors increases the overall delivery ratio. Delivery-based volumes also have a negative correlation with the liquidity of a stock: in other words, higher the trading at a counter, lower are the deliveries taken by investors, dealers said. Delivery position of market heavyweights like Infosys (with 43% delivery trades), Reliance Industries (21%), ICICI Bank (19%), SBI (11%), ACC (28%) and ONGC (39%) reveals that deliveries as a proportion of the total number of shares traded have more or less remained at period low levels. Before the January crash, day-trading volume accounted almost 70% of the total traded volumes. But post the crash and the budgetary changes on securities transaction tax, speculators and jobbers are keeping away from the market. “Traditionally, retail investors never buy at lower levels. Many a time they just manage to catch a rally midway. Up till July, investors were expecting a bounce back in equities; pessimism has set in the markets now,” said Motilal Oswal Securities joint managing director Ramdeo Agarwal. “The market has become highly uncertain. Investors who are willing to take risk can buy companies with good fundamentals and sound track record. Only long-term equity investments are advised,” Mr Agarwal added.
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