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This website is purely ACADEMIC in nature and NOT a stock market recommendation service or a tip provider. No live data or feeds are provided and all information is historic only. Information is provided for ease of understanding for the purpose of learning. Accuracy of definitions etc is not mantained. I am not a SEBI or IRDA registered.
Stock Delivery Volumes and Daily Traded Volumes
Delivery of shares means exchange of shares between parties during the market hours with an intention to take them to demat.
i.e Investors do not want to trade but take them for delivery and hold them in their demat.
Our stock markets follow T+2 method of taking delivery.
i.e shares bought today (T day) will come to demat after two days (T+2 days).
When more number of shares are taken as delivery, it means that strong accumulation of the shares is happening.
Since it is investors (and not speculators) who are showing the interest, it shows that the company has better prospects going forward.
This tells us that upside in CMP is possible from the current levels.
A higher percentage of deliverable quantity also indicates that the immediate trend may continue.
The higher the percentage of deliverable quantity to traded quantity, the better it is as it would indicates that most buyers are expecting the share price to move up further in case the stock in on an uptrend and fall more if it is in a downtrend.
A surge in delivery percentage of a stock indicates accumulation or distribution patterns of strong hands buying or selling the scrip.
Day traders prefer highly-traded scrips with low deliverable quantity, but investors should observe delivery percentage with stock price movements.
A rise in delivery percentage along with an increase and drop in stock prices indicates bullish and bearish trend, respectively.
A drop in delivery percentage with an increase in stock price indicates that the scrip is in the grips of traders or speculators and the price uptrend is not sustainable while a drop in delivery volume as well as the stock price indicates a trend reversal.
There are several technincal studies that depend on daily traded and delivery volumes to predict price moments.
Rule #36: Check deliverable quantity of shares to check delivery trends.
Keep a watch of daily delivery trends of your share regularly.
We can check Delivery quantity on the stock pages of NSEIndia.com and BSEIndia.com
For historical data of stock delivery on a daily basis, check https://www.nseindia.com/products/content/equities/equities/eq_security.htm
Speculative interest on low delivery volume means that the stock price can fall just as fast as it rose.
Looking at delivery volume does indicate the level of interest in a stock, but it gives you a short-term view. For long-term investors, fundamentals are more important.
Thus, investors, short-term or long-term have to keep an eye on delivery volumes to ensure that their investment is on the right track.
If you are going to buy a fundamentally good stock, check volumes, if they are consistently low, ask yourself what is the reason.
Is the promoter holding high or are other investors not interested—what is the reason.
Studies show that in the case of fundamentally good stocks, the stock volumes will go up when the market is at its peak.
This is because, when markets are high, investors look for quality companies and hence move from risky (read: Microcap) to safer (read: Largecap) companies.
Check the average delivery volume two-three months prior, any sharp price movement accompanied by very small volume may not be sustainable for long. Keep in mind, if stock prices have rallied substantially and volumes are also at the highest it could be close to a market peak.
To further confirm your position compare the average delivery volume in the month with historical monthly average stretching back one year or till the previous peak or bottom as the case may be.
Lastly, compare the overall market delivery volume with the stock volume to see if there is any extraordinary interest or lack of it in the stock verify this against recent news and stock fundamentals to see if a volume pick up or fall is in line with what’s happening in the company.
Traded Volume vs Delivery Volume
Trading volume on a counter on any given day comprises a significant share of intraday trades and deliverable trades.
In case of the former, shares do not move from one demat account to another as they these trades get squared off within the session, whereas in the case of the later, shares shift from one account to another.
One amongst the several indicators
The deliverable quantity-to-traded quantity ratio can be misleading.
On the face of it, the indicator conveys that on a day, market participants took a higher percentage of shares as delivery as opposed to intraday transaction.
This leads market participants to believe that the stock has turned bullish, as buyers expect a rapid rise in price.
The problem, however, is that we can never really plot a timeline to this expectation.
In other words, based solely on this indicator, I cannot justify for how long the stock will exhibit bullishness.
Relation with other parameters
Lower deliverable quantity to traded quantity means the stock is in the hands of traders and they generally square off positions within a day.
Investment decision should not be based on this one parameter alone.
We cannot conclude that a high delivery per cent of shares is good for the stock.
One should evaluate other parameters along with this, for example consistency in the rise in deliverable quantity and rise in stock price (in technical term ROC).
From derivative perspective, one should look at open interest and stock-specific PCR as well as new development on the price chart.
- Share price at 52-week high and low (Rule 19)
- Business Fundamentals Analysis (Rule 20)
- Limit investments in group companies or subsidiaries (Rule 23)
- Upper Circuit and Lower Circuit (Rule 30)
- News and its impact on Stock prices