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Delivery-based volumes on the BSE and the National Stock Exchange (NSE) surged to a year’s high in March.
According to data compiled by the Business Standard Research Bureau, the delivery ratio, of the percentage of shares changing hands to the overall traded amount, surged to 49 per cent in March. For December, January and February, the ratio was 46 per cent, 44 per cent and 43 per cent, respectively. In March 2014, 51 per cent of the traded shares were converted into delivery, stock exchange data show.
Delivery-based trading implies buying shares and holding those for a certain period. The shares bought are credited to the investor’s demat account.
Among sectors, information technology, finance, refineries, cigarettes, mining, sugar, personal care products, food processing, fertilisers and textiles have seen a rise in delivery-based trading.
Analysts say a reason for the surge in delivery-based trades is buying by long-only funds, which bought into these stocks in large quantities, owing to attractive valuations.
Deven Choksey, managing director & chief executive, K R Choksey Securities, says: “I think some stocks in the large- and mid-cap segments have been bought into by long-only investors in big quantities. Whenever long-only investors see a quality stock in a large quantity and at an attractive price, they want to buy into those. The market fall in March would have seen a large number of shares being offered, which these long-only investors bought into. I don’t think this is a year-end phenomenon that one sees in March.”
G Chokkalingam, founder and managing director, Equinomics Research & Advisory, however, believes there has been a lot of selling pressure due to tax planning and simultaneous accumulation of stocks. This made valuations appealing, especially of mid-cap stocks. “Though broad indices fell about nine per cent from their peak. Many mid-cap stocks fell 20-30 per cent this month, which led to many individual investors accumulating shares due to attractive valuations,” he says.
Analysts feel delivery-based buying could continue in some sectors through the next few months, though companies’ earnings will have a bearing on the overall market direction.
“I think a lot of stocks in these sectors are being bought into by retail investors. As long as there is major correction in the markets, sectors such as information technology, finance, personal care products and refineries will be bought into by retail investors,” said U R Bhat, managing director, Dalton Capital Advisors.
On the fertiliser sector, Dhananjay Sinha, head of institutional research at Emkay Global Financial Services, said he preferred companies with asset-light, flexible business models such as Sharda Cropchem and Dhanuka Agritech, or companies with export exposure such as UPL and PI Industries.
