With high level of nervousness and uncertainty prevailing over the global equity markets and Indian equity markets completely at the mercy of the US and other global markets in the past couple of trading weeks, investors are increasingly resorting to intra-day trading rather than executing delivery based transactions. This is proved by the fact that the average delivery volume on the National Stock Exchange (NSE) has declined sharply to 26% in the month of August till date, which was at 39.66% in July and 40% during June 2007. The average delivery volume was highest in the month of January, at 43.36%.
Market experts opine that with negative surprises emerging from the US market on a daily basis and Indian markets mirroring the developments in the US, investors are afraid of carrying overnight positions and prefer to square off their positions. With a strong bearish undertone and the possibility of the market developing further cracks, experts feel that there will not be any major fresh commitments from long-term investors, at least in the near future.
Amitabh Chakraborty, president-equity, Religare Securities, said, ?It is normal during times of high levels of uncertainty and volatility that investors will not be willing to carry forward their positions and will prefer to square up their positions on a daily basis. High delivery volumes can be seen only when there is a secular trend of a bull market.?
A dealer based with a domestic brokerage firm said, during times of uncertainty and high volatility, operators and speculators become active to take advantage of the situation and dominate the market, resulting in a dip in the delivery volumes at the exchanges. When the market crashes and reaches the bottomed-out level, it becomes an investors? market where the delivery volumes automatically pick up.
The dip in the delivery volumes on the bourses in the month of August could also be attributed to the exit made by foreign institutional investors (FIIs) who are major players in the Indian market and who are permitted to execute only delivery-based transactions. Foreign institutional investors (FIIs) are net sellers worth Rs 5,400 crore on the domestic equity bourses in the month of August after they were net buyers to the tune of Rs 1,643 crore and Rs 23,872 crore in June and July respectively.