Intra-day trading constitutes three out of four buy and sell reflecting that investors confidence is still not fully resorted. On March 19, intra-day trades were 71.5 percent of total market volume of Rs 9.8 billion, and this was the highest intra-day trading ever since the imposition of price floor some nine months back, according to a study conducted by Mohammad Sohail, a leading stock market analyst.
Over the years, the delivery ratio has been on the increase in Pakistan. That is, more delivery based buying was occurring as investor confidence was improving and they were putting money for medium to long term, Sohail observed.
However, according to his calculations, last week saw mounting day trading, which means that investors still have a very short term view on the market and that is why they dont want to carry their position for the next day. Investors and brokers have many issues with regard to non-payment by clients, and unauthorised use of clients shares by brokers. These issues severely affect investors confidence in the market, the study said.
Sohail observed that a positive rally is generated in the market when delivery ratio improves, and vice versa. Since a higher delivery ratio means diminishing supply of shares, consequently the share prices starts to move up, and vice versa.
Thus, with declining delivery ratio last week, there were doubts of sustainability of the recent rally, he said, adding that delivery ratio is the amount settled, calculated as a percentage of total volume. According to him, another reason for rising day trading by investors was shortage of liquidity, and he believes that with hardly any activity in the CFS and futures market, investors were also forced to square their positions before the market closed.
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