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Partha Pratim Sinha
New Delhi, Dec 16: Delivery-based transactions on the National Stock Exchange (NSE) is on the decline. Between April and October this year, the value of shares delivered as a percentage of total traded value on the exchange dropped from 21.94 per cent to 15.26 per cent. The fall in the delivery-based trading indicates excessive speculation as operators are using the five-day trading cycle to build and square off their positions in the same settlement period.
According to NSE deputy managing director Ravi Narian, ``Uncertainties on the domestic as well as the overseas front over the past few months are the main reasons for this decline, says Ravi Narain. He added that arbitrage opportunities between the National and the Bombay stock exchanges also had a bearing on the decline in the value of shares delivered on NSE.
The present phase of transition from the shares in the physical form to the dematerialised form also impacted the delivery-based trading on the exchanges. According to Narain, the Indiancapital market is in the ``last gasp of the physical certificate problems''. According to him, once the compulsory demat trading in 15 scrips commences in January, delivery-based trading will go up on the exchange as demat transactions are all delivery-based. According to Narain, market Uncertainties has pushed long-term investors in the background. On the other hand, this has prompted speculators to book profits at the slightest available opportunity. A Delhi-based broker, who also attributes the fall in the delivery-based trading on the exchange to the absence of long-term investors, says the market is dominated by short-term investors who are basically speculators. "Long-term investors have been forced into hibernation till the market revives," he added.
V D Aggarwal, president, NSE traders' association, says the problem of bad delivery is a major cause of worry for the broking community. On NSE, which is spread across the whole country, it is difficult for a broker to know from whom he is takingdelivery and, hence, remains worried about the genuineness of the shares delivered. In such a situation, NSE brokers usually prefer to square off their positions in the same settlement, says Aggarwal.
Thus, while the total value of trades on the exchange increases, it brings down the total value of shares delivered. This is substantiated by the fact that while the total value of shares traded on NSE went up from Rs 29719 crore in April to Rs 34615 crore in October, the value of shares actually delivered dropped from Rs 6520 crore to Rs 5281 crore.
The bad market conditions has also forced lower volume of transactions by FIs and foreign institutional investors (whose deals are always delivery-based), says a market observer. However, Narain thinks this has had a minuscule effect on NSE's delivery-based transactions.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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