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Investors have turned bullish on equities after big-bang reforms were announced by the government last month, as delivery-based volumes, buying shares and holding these for a certain period, touched an 11-month high.
Average monthly stock delivery volumes on the Bombay Stock Exchange (BSE) and the National Stock Exchange have risen to 43 per cent in September, the highest since October 2011, when 44 per cent of the total traded quantity had resulted in delivery. The average delivery-based trades were in the range of 38-40 per cent between December 2011 and August 2012.
Attributing the reasons behind this trend, market analysts said investors had become quite bullish after the reform rush from the government and the strong inflows from foreign investors.
Foreign institutional investors (FIIs) have pumped in Rs 92,713 crore ($17.85 billion) so far in 2012 and made net investments of Rs 29,643 crore ($5.55 billion) since August in Indian equities, the Securities and Exchange Board of India data show. "There is an excellent cocktail of global liquidity and local reforms. In this backdrop, investors have become more confident in taking aggressive delivery positions. If the government can maintain the reform process, one can expect this trend to continue," said Jagannadham Thunuguntla, head of research at SMC Global Securities.
A number of front-line and second-rung companies have attracted large volume block deals involving leading FIIs, during the current rally.
Kishor Ostwal, chairman and managing director of CNI Research however, says "the delivery volume is rising because the share prices are rising, with a rising market and the exit of retail investors".
Since August, the bellwether Sensex index of the BSE has rallied 7.9 per cent or 1,375 points to close at 18,805 on Thursday, gaining 22 per cent so far in 2012.
ITC, Cairn India, Bharti Airtel, PowerGrid Corporation, ONGC, HDFC, HDFC Bank and NTPC are few examples, where large delivery-based volumes were observed in September. More than 70 per cent of the total traded quantity in these counters were delivery-based.
Among the sectoral classifications, information technology, aviation, automobiles heavy commercial vehicles, engineering, real estate, oil exploration, cigarettes, hotels, broking firms and domestic appliances have registered a rise in delivery-based trading volumes.
"FII inflows continue unabated amid optimism that the slew of reforms unleashed by the Centre will push growth higher. Beaten-down sectors like infrastructure and capital goods have been among the best performers, while defensives like FMCG have under-performed in the past three weeks," said Dipen Shah, head of private client group research at Kotak Securities.