Its getting cold at the top. The chill is being felt at the higher level of the markets, where delivery based transactions have come down drastically in the month of September, following a sudden rise in the market volatility, leading to a sharp jump in the turnover.
So while the average turnover of the National Stock Exchange (NSE) in the month of September jumped to Rs 12,645 crore from the earlier levels of Rs 10,511 crore, the average deliverable volume came down to 21% from 26% of deliveries in the month of August. This signifies a marked increase in speculation, where traders would rather square off their positions, rather than take delivery.
The average deliverable volume was at 39.66% in July and 40% during June 2007. The average delivery volume of NSE was highest in the month of January 2007 at 43.36%.
There?s another interesting angle to it. Around 48% of the entire September?s market turnover, which has been exceedingly high, came in the last eight trading sessions.
The average daily turnover of these sessions at Rs 15,185 crore was much higher than the monthly average of Rs 12,645 crore. The average deliverable volume of the last eight sessions was also higher at 24.625%, compared to a monthly average of 21.01%, the rise in deliverable volume was on the back of a higher turnover during the same period.
This period is significant, as during this time, markets reacted to the US Fed?s decision to cut its key rates by 50 basis points (bps).
Anita Gandhi, head, institutional business, Arihant Capital Markets, said, ?If the delivery volume has not really picked up inspite of heightened FII activity, who are only permitted to do delivery based transactions, it indicates that there could be some amount of front running happening ahead of FIIs buying in the Indian market.?
Market experts also attribute the low delivery volume on the bourses to the heightened level of activities of intra-day traders. A dealer based with a domestic brokerage firm said, during times of uncertainty and high volatility, operators and speculators become active and take advantage of the situation to dominate the market, resulting in a dip in the delivery volume in the exchanges. When the market crashes and reaches the bottomed out level, the market skews the other way round and becomes an ?investors market?, where delivery volume picks up.
With the market reaching new highs, the turnover has risen and the deliverable volume has started declining. The average BSE turnover in July and August was at Rs 5,684 crore and Rs 4,820 crore respectively, while that of the NSE was at Rs 12,147 crore and Rs 10,511 crore respectively.