Delivery-based Volumes on BSE Surge to a Record 77%

Year-end portfolio churning by tax-savvy investors, bulk deals & fund buys boost volumes

Year-end tax-saving strategies, large bulk deals and fund-based buying have pushed up delivery-based volumes despite volatile market conditions ahead of the forthcoming RBI policy and earnings season. The rise was sharper towards the close of 2011-12, with delivery-based volumes surging to a new high of 77% of the total traded quantity on the BSE. 

"The spurt in delivery-based volumes can mostly be attributed to increased trading in the last fortnight of March. Smarter investors were churning portfolios to save tax," said Way2Wealth Brokers COO Ambareesh Baliga. Many investors opted to book short-term capital losses to adjust against capital gains that they made in the last financial year. 

Such transactions are generally done on delivery basis and so contribute to delivery-based volumes, said Baliga. Apart from year-end adjustments, brokers also attributed a steady flow of foreign funds and large bulk deals to the rise in deliveries on the bourses. 

"Many ETFs are building portfolios of bluechip companies as India offers a unique advantage of cheaper valuations which are at their lowest than the past 4-5 years' average," said Deven Choksey, managing director of KR Choksey Shares and Securities. 

Many shares are available well below their book values which is also driving fund buying in the current market, he added. Foreign inflows, including investments through ETFs, amounted to over . 9,000 crore in March. 

Delivery ratio — the percentage of shares actually changing hands in relation to the total traded quantity — climbed to 60.8% on March 26, compared with 45.7% calculated for all the previous days of the month. It was 57.3% on the next day but shot up to 77.3% on March 28 — a figure never seen in the history of the BSE. Contributing to the spurt in the ratio was a large bulk deal in Schneider Electric Infrastructure through which Energy Grid Automation bought 17.5 crore shares from Alstom and Areva T&D. 

According to Indiabulls Securities CEO Divyesh Shah, foreign funds led by ETFs have been actively participating in the market, driving deliverybased volumes. "Fundamentally, India is in a better position than other major global economies," he said, adding, "Pre-budget concerns over lack of policy initiatives have eased a bit and the market is expecting some positive action on the FDI front in the near future." 

Some brokers feel that sustained fund buying and the government's efforts to encourage investment through the proposed reduction in the Securities Transaction Tax (STT) in the FY13 Union Budget may help keep the delivery ratio high in future. The 20% cut for delivery-based cash market transactions is being viewed as a move towards discouraging excessive speculation. 

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