High flyers face delivery pang as market plays safe

MUMBAI: Some of the high momentum stocks, which have consistently been scaling new highs in the current market, have seen a decline in delivery-based volumes over the past few days.

This could be an indication of a slowdown in genuine fund-based activity, as they reach their peak. The trend is also evident even among a few blue chips, which, till a few days ago, were trading with a healthy delivery ratio on the back of a major institutional buying. Prospective investors are expected to take a cautious view of this trading pattern and wait for share prices to correct before re-entering the counters, according to brokers.

Delivery-based volumes are the quantity of traded shares which actually change hands and are not squared off on the same day. The delivery ratio is calculated as a percentage of the number of shares actually delivered in the market in relation to the total number of shares traded on a particular day.

According to ST Gerela, CEO, Satco Securities and Financial Services, if there is a fall in delivery ratio in high momentum shares of a fundamentally strong company, it could mean that investors are staying away from trading for some time due to the high price. They, however, are likely to make a comeback later to gain from the company’s growth story. However, one has to be cautious about fundamentally weak companies where delivery ratio has continuously been low. “If shares of such companies have been on a rise on low delivery ratio, that may be because of insider activity which is not in the interest of retail investors,” he said.

A lot of stock-specific activity is seen in the market, even though broader indices have not moved much, according to Rajesh Baheti, managing director, Crossseas Capital Services. There could be the possibility of speculative interests driving some stocks due to lack of wider participation of investors in their trading, he added.


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State Bank of India, which touched a new high on Thursday, recorded delivery-based volumes of 19.3% on the day and 9.5% on Wednesday, compared to 25% and 31% on the two previous days. Only 9.5% of the total traded volumes in WABCO-TVS resulted in deliveries on Wednesday, when the stock hit a new high of `1,058. The ratio was much lower than 34% and 43%, respectively, during the previous two days. It, however, bounced back to 26% on Thursday. Shriram Transport Finance is another notable case, where the ratio slipped 12.3% on Wednesday from 56% and 43% during the previous two days. It, however, rose substantially to 32% on Thursday, when the stock hit a new high of `761 during intra-day trading.

There has been a slowdown in fund-based buying during the past few days, impacting delivery-based trading on bourses. According to data available with the BSE, foreign institutional investors were net-sellers for `86 crore while domestic institutional investors made small purchases worth `24 crore on Wednesday.