Delivery-based equity trades drop to five-year low in NSE

Rajalakshmi Nirmal | BL Research Bureau | Updated on August 13, 2019 Published on August 13, 2019

Signals rising risk-aversion among traders

There has not been much action on the volume's front in equity bourses in the last few months. Data from NSE shows that the lacklustre volumes in bourses could be explained by the absence of long-term investors in the market.

The proportion of trades that are delivered has hit the lowest in several years.

In the National Stock Exchange (NSE), deliverable volumes of the shares traded in July is 20.5 per cent. This is close to levels seen during market lows of 2009.

In 2009, NSE had recorded deliverable volumes of 18-19 per cent for a few months. But since then, the market has never seen the proportion of delivery trades plunge to the current low levels in any month. It has only kept scaling higher and held at an average of 25-26 per cent every month.

The highest in deliverable volumes in recent times is 30.01 per cent, which was recorded on March 2017. That was the time when the market was doing a breathless run to 9K.

In the last two years, however, while the Nifty has scaled over 11K mark, deliverables volumes have been drying up. In 2017-18, while deliverable volumes at the exchange averaged at 25.8 per cent, in 2018-19, it has come down further to 23 per cent.

What does this mean?

A lower proportion of delivery-based trades usually signals lower participation by long-term investors and caution among retail investors, say market observers.

The yearly trends show that in 2017, FPIs net invested ₹51,252 crore in 2017 and in 2018, they turned net sellers. They net sold ₹33,000 crore worth of shares. In 2019 while the beginning of the year was good, they have been pulling out investments since July.

In July, FPIs net sold shares worth ₹12,419 crore. In August so far, they have net sold ₹11,135 crore worth of shares.

In recent months, there has not been very active participation by domestic institutional investors either. In the period between April and July, their net investment in equity has been ₹23,899 crore. In the same period last year, their investment was ₹40,291 crore.

Published on August 13, 2019
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