Falling volumes hint at lack of long-term investment interest

ET Intelligence Group: Bull markets typically top out when both commitment and valuations turn decisively frothy. Experts are yet to ascertain whether stock valuations have peaked, but there are indications that long-term investment commitments are thinning.Combined delivery volumes on the BSE and NSE in July dropped to 32.96 per cent, the lowest in the past five years, according to ETIG database. On average, delivery volumes on both platforms stood at 40.4 per cent in the past five years. Delivery percentage is directly proportional to investment commitment, with a higher level suggesting greater upside expectations for a stock or an index.Although the indices are at record highs, cash turnover on both exchanges stood at a combined Rs 15,904 crore — 38 per cent lower than January. Cash turnover has consistently fallen since the January highs, when the markets saw much broader participation.Institutional buyers are cautious and their activity is at the lowest in a year. Participation by foreign and local funds stood at 13.3 per cent and 5.8 per cent, respectively, in July. The current readings of FPI and local fund participation are 15.8 per cent and 19.6 per cent, respectively, of their last one-year averages. 65206676 The main reason for the fall in participation by overseas funds is low churning of portfolios — foreign funds generally stick to quality large-cap companies. With no significant investment triggers in the near-term, overseas funds are either deploying fresh cash in existing stocks and sectors or exiting several due to elevated valuations.FPIs have been net sellers of $1.1 billion in Indian equities in 2018. Cumulative selling by FPIs in the past four months stood at $3.13 billion. By contrast, local funds brought about $10 billion into Indian equities in this period. 65196920 65195988 65193015

from The Economic Times https://ift.tt/2mXXUTp