Long-term bets off, cash delivery volumes plunge

Cash delivery volumes as a percentage of overall stock market volumes in the last quarter dipped to the lowest ever as retail investors continued to shy away from equities even as institutional investors preferred to trade in derivatives.

Cash delivery volumes as percentage of overall market volumes fell to 2% last quarter from 3% witnessed last fiscal and 5% in fiscal 2010, according to a recent report by brokerage house Motilal Oswal Securities.

The market experts attribute the constant fall in delivery volumes to low interest among retail investors currently.

“Cash delivery volumes go up when there is genuine interest in equities and currently that is lacking. There is no confidence or hope in markets and the concept of long term investing too is getting questioned. New retail investors aren’t coming in now and those invested aren’t even looking at their portfolios to churn or buy additional stocks,” said Rahul Rege, business head – retail, at Emkay Global Financial Services.

Retail investors contribute nearly 50% to overall cash market, while the shares of proprietary traders, foreign institutional investors and domestic institutions stand at 25%, 17% and 8%, respectively.

The sharp rise in option volumes with BSE pushing up its derivatives segment by incentivising investors has also contributed to decline in cash delivery percentage.

The Motilal Oswal report said the options segment contributed to 75% of overall market volumes in June quarter, compared with 68% witnessed during last fiscal and 57% during fiscal 2011.
The lower retail interest has also hit intraday trading activity in cash segment. The intraday volumes stood at just 5% last quarter as compared to 8% in previous two quarters and 10% in fiscal 2011.

Prasanth Prabhakaran, president, retail broking, at IIFL believes that the retail investors have been looking at indirect equity exposure and other asset classes.

“The retail volumes have come down drastically over last three years with people gradually looking at other investment avenues like gold, debt and mutual funds
particularly SIPs and ETFs. The cash delivery volumes have been in the range of 2-4% over the last few years as institutional investors have taken a liking to derivatives segment,” he said.

Going by the average daily cash turnover for last month, it’s very likely that we may see cash delivery volumes going down further this quarter. The average daily cash turnover in July stood at `11582 crore, lowest in current calendar year and second lowest in last 41 months. Experts believe that retail participants may not come back to equity markets in a hurry.

“A lot of retail investors are stuck in midcap stocks and unless they see markets going up consistently, retail participation may remain low,” said Vinay Agrawal, executive director - equity broking at Angel Broking.