Delivery-based volumes hit 4-year high

That contrasts with the trends last year when speculative trading was more the norm than exception.

Low interest rates on fixed deposits and a sharp increase in margins are also reasons for the increase in delivery volumes, said experts.

According to the latest data available with the exchanges, the average daily delivery ratio – the percentage of shares actually changing hands in relation to the total traded quantity – was 38% in 2021, a level seen in 2017. The delivery ratio hit a 10-year low of 33% in 2019, and since then, it has risen steadily. The average daily delivery volume in 2020 was 35.28%, while in 2018, it was 35%.

Delivery-based trades in the cash market generally peak when the market is nearing its highs, but this time with low-interest rates, the trend has reversed.

“Both overall volumes and delivery-based volumes have risen substantially over the last few months with an increase in retail participation, with investors now buying with short- to medium-term perspectives due to low-interest rates on fixed deposits,” said Dhiraj Relli, MD, HDFC securities. “There is a long-run relationship between interest rates and delivery-based volumes.”

Delivery volumes are at a record high of 1,422 million shares a day in 2021, a jump of 35% over 2020 or a 124% surge over 2019.

“We have seen that delivery volumes moved to 36% this year compared to 28% last year,” said B Gopkumar, MD, Axis Securities. “Incremental delivery volumes have largely come from mid-cap stocks while quality buckets have seen good delivery-based volumes recently.”

NSE500 stocks saw an average daily delivery-based turnover of ₹25,500 crore in September, compared with ₹21,900 crore in August or ₹20,300 crore in July. The average daily delivery-based volumes were over 40% between 2010 and 2017, which later declined with mid- and small-cap crashes.

Delivery-based volume in a stock is widely watched as it shows whether the buying interest is coming from investors who intend to hold it for a longer time or from traders who want to make a quick buck.

Analysts believe delivery-based buying could continue over the next few months, although much will depend on earnings growth.

“Overall, the market sentiment was very positive in the last few months, and investors accumulated mid-and small-cap stocks in anticipation of good numbers,” said G Chokkalingam, CEO, Equinomics Research. “The trend is likely to continue until companies report below-expected earnings in the coming quarters.”