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Delivery-based volumes in June at lowest level in 2020 amid market rally

The S&P BSE Sensex gained 7.7 per cent in June
The average delivery-based volumes on the BSE and the National Stock Exchange (NSE) in June were at their lowest level in the current calendar year 2020, as a sharp-run up in stocks since their March 2020 low deterred retail investors from taking long-term positional trades.

In June 2020, less than one-third (33 per cent) of the total traded quantity at the bourses was converted into delivery as compared to two out of five traded shares (40 per cent) converted into delivery in March 2020.

According to the month-wise data compiled by Business Standard Research Bureau, the delivery ratio —the percentage of shares actually changing hands in relation to the total traded quantity — was about 31.8 per cent in June, the lowest since December 2109.  In December 2019, 31.3 per cent of the total traded stocks was converted into delivery.

“While on one hand investors have been worried about the health of the economy, they have been booking profit at regular intervals whenever markets have rallied. They have been speculating more in the markets rather than buy and take delivery to hold for the long term,” explains G Chokkalingam, founder and chief investment officer at Equinomics Research.

The S&P BSE Sensex gained 7.7 per cent in June and recorded its second sharpest monthly rally in past 15 months on the back of liquidity. In April 2020, the benchmark index had rallied 14.4 per cent. The benchmark indices, BSE Sensex and Nifty50 which rallied 18.5 per cent and 20 per cent, respectively, in the June quarter, had recorded their sharpest quarterly gain in 11 years. In the June 2009 quarter, Sensex and Nifty50 had rallied 49 per cent and 42 per cent, respectively.

In March 2020, the delivery-based trading stood at 37.2 per cent – the highest level since April 2019. However, the benchmark indices had recorded 23.1 per cent fall during March 2020 – their sharpest monthly decline since October 2008, as coronavirus-led lockdowns across the world triggered fears of a recession.

Going ahead, most analysts see limited upside for the markets from the current levels and a volatile phase given the sharp rally seen over the past few months, which they feel is discounting most positives for now.

“Our one year ahead (June 2021) our Nifty50 target stands at 11,200 based on a multiple of 17.3x. Key risks to economic revival include: a) Covid-19 cases continue to rise in India although the doubling rate has been reducing; b) rising geo-political tensions between India and China; c) vulnerable Government finances due to weak revenue prospects, although lower-than-expected fiscal stimulus and higher excise collection on oil prices to mitigate the risk,” wrote Vinod Karki and Siddharth Gupta of ICICI Securities in a July 5 note.

Those at HDFC Securities, too, share a similar view and see a limited upsides across post the recent run-up, except financials and infra names where anyways recovery could take longer. “Our preferred sectors are telecom, information technology (IT), chemicals, pharma, insurance, large banks, cement and gas. We are underweight consumption (staples, discretionary and autos),” said Varun Lohchab of HDFC Securities Institutional Research.


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