Investors seem to have lapped up some of their favorite stocks in the broad market selloff last week. Delivery-based volumes on BSE and NSE hit a 20-month high in November as investors, keen on deploying cash, found opportunities in the decline in midand small-cap shares.
In theory , investors take delivery of a stock when they are confident about the stock's prospects. In the last many months, investors have used short bouts of correction in the market to buy stocks, which led to delivery volumes surging during the declines.
According to the latest data available with the exchanges, the delivery ratio --the percentage of shares actually changing hands in relation to total traded quantity -was 44% in November, a level which was seen in May last year.The delivery ratio hit a three-year low of 38% in July this year and since then it has risen steadily.
“There are number of domestic investors as well as foreign longonly funds sitting on cash, waiting for each correction to buy , and several such opportunities have come in recently,“ said Prashant Prabhakaran, president retail broking at IIFL. “The incremental de livery volumes have largely come from mid-cap stocks.“
Last week, the mid-cap indices posted their highest weekly loss in nine months roughly 4.3%.“Though the markets will remain volatile ahead of the US election, investors are buying stocks on every dip,“ he added.
In the past three months, average delivery volumes surged about 600 basis points (100 basis point is one percentage point), compared with 38% in July 2016. During this period, the Sensex has gained half a percent while BSE Midcap and Smallcap indices have risen 8.5% each. Of the 131 crore shares traded on the BSE & NSE in November, investors took delivery of 58 crore.
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