The intra-day trading in the cash market has seen a spurt in the past 10 days. This comes on the back of a considerable rally in mid-cap scrips and increased participation in the market after key benchmark indices and frontline stocks breached their 200 DMAs, or daily moving averages.
According to Bloomberg data, the proportion of cash-based delivery volumes has declined about 17% over the past 10 days, indicating a spurt in intra-day trades.
The market has mostly been trading in the positive band for the past two weeks. This has brought back the confidence among market participants, especially high net worth individuals and retail investors, say market observers. Average daily turnover for the NSE cash market in the past 10 days is Rs 13,343 crore compared with an average turnover of Rs 12,734 crore for the first three months of the year. The mood is more upbeat as well, with the Nifty crossing the 5620 mark to breach the 200 DMA on March 25. Also, unlike in the first two months of the year, March has seen net inflows from foreign institutional investors (FIIs). FIIs purchased shares worth $1.56 billion in March compared with combined sales of $2.21 billion in January and February.
When the market trades below its 200 day moving average, any negative newsflow can drag the market down substantially by 5-10%. Now that the market has crossed this level, it has given market participants the confidence to create fresh positions,? said Alex Mathews, head?research, Geojit BNP Paribas.
Apart from most frontline stocks, some of the mid-caps have also breached their 200 DMA, say market observers. ?The current rally in mid-cap stocks is fuelling intra-day trading,? said Prasanth Prabhakaran, president, retail broking, IIFL.
Investors opting for intra-day trades can leverage their positions, which allows them to take a significantly larger exposure without paying the full money upfront. And most of this leverage money is used to trade in mid-cap scrips, say market observers.
The recent rally has also piqued the interest of jobbers and day traders as they hope to cash in on the price volatility. ?Jobbers and day traders have become active once again,? said Rakesh , senior VP and head?distribution, Bonanza . Jobbers are dealers that buy and sell securities rapidly to make small profits, often less than a rupee, on each trade.
Typically, intra-day trades constitute bulk of market volumes, and delivery makes up the rest. Unlike in delivery, positions have to be squared off on the same day for intra-day trades. Also, intra-day trading is cheaper than taking delivery as brokerage rates for the latter are about five to 10 times higher than the former.