The stock market seems to be nearing an overbought position. This is indicated by the rise in delivery volumes in December on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The delivery volumes on the NSE increased 54.80 per cent to 868.15 million shares in December 2002. On the BSE, delivery volume of BSE 500 stocks increased 50 per cent to 412.76 million shares.
On the contrary, the aggregate trading volumes on the BSE increased 29.9 per cent to 1,497 million shares.
On the NSE, trading volumes moved up 35.4 per cent to 3113 million shares. The fear of over bought position is not because of a rise in delivery volumes, but the rise in delivery as a percentage of total trading volume is the main cause for concern.
The delivery volume as a percentage of total volume moved up around 21 per cent in October to 24 per cent in November and further to 27.8 per cent in December.
Interestingly, the movement in major indices, the sensex, the S&P CNX Nifty and BSE 500, has narrowed considerably after the November rally. The sensex registered a 400 points jump between November 1 and December 13, but showed a modest 18 points rise between December 13 and January 2, 2003.
The Nifty moved up by 115 points between November 1 and December 13, but recorded a modest jump of seven points in the subsequent period.
The stocks which considered to be over bought category are those which have recorded hefty delivery volumes. Reliance Industries, Satyam Computer, Tata Engineering, HCL Technologies, United Phosphorus, Mahindra & Mahindra are moving in a narrow range ever since the stocks have posted substantial gains over their October 31 level.
The delivery volume in these stocks, as a percentage of traded volumes, moved up almost five percentage points in December.
The sectoral trend in delivery volume shows over bought position in software, entertainment, telecommunication, pharmaceuticals, cement, personal care, 2/3-wheelers and host of other sectors.
The delivery volumes in software stocks which accounted for 9.9 per cent of total traded volumes in September 2002 accounted for 14.8 per cent of total traded volumes in December.
The delivery volumes in entertainment stocks increased from 15.32 per cent of the total in September to 23.34 per cent in December.
The delivery volumes in telecom shares moved up 13 percentage points to 36 per cent. And over 50 per cent of the traded volumes in pharmaceuticals, power, 2/3-wheelers, fertilisers, personal care, steel and textiles segments were delivered during December.
