BSE NSE Rise in Volume, Delivery and Fall in Price, Stock Market Index Analysis
BSE NSE rise in volume is a very popular phenomenon. However, it becomes essential
to delve deeper and understand whether the rise in volumes on BSE and NSE is driven
by a spurt in delivery volumes or speculative volumes. Rising delivery percentage
accompanied by rising prices is a good signal. It means that there is actual buying
happening in the stock and investors are taking a long term positive view on the
stock. But rising delivery and fall in price is not a good sign. It means that the
delivery is being led more by people actually selling the stock with a view to exiting
the stock. That is a clearly bearish indicator. From the stock market index analysis
point of view, rising delivery and fall in price is a classic example of a weak
or bearish trend in the stock.
Rising VDP and falling prices – The LKP Securities page…
LKP Securities has a dedicated page to focus on stocks that are seeing a rising
VDP with falling stock prices. How do you interpret if a stock has seen a consistent
rise in the VDP (Volume delivery percentage) but that is accompanied by a fall in
the stock price? It clearly indicates that the relative strength of the stock is
weakening as more investors are now keen to sell the stock. That is why the price
is falling in the midst of rising volumes. It is indicative of the fact that investors
are not too keen to hold on to the stock and hence want to exit the stock en-masse.
That is a clearly bearish signal and the trend gets confirmed all the more if the
trend continues going ahead also. This should also be a trigger for traders and
investors to check if there are some fundamental issues with the stock and the specific
reason why the prices are falling with rising delivery volumes. It is certainly
a starting point to investigate in greater detail.
Why this measure of rising VDP and falling prices is important?
In the real markets, this normally acts as a lead indicator of the stock. For example,
it has been noticed that before a major downturn in the stock commences, one can
see a sharp rise in delivery volumes even as prices are either flat or tepid. This
could be the first indication. One cannot directly act on this indicator but must
use this as an actionable input to decide on the future course of action with respect
to the stock. As you expand the time frame from days to weeks, the potential fault
lines in the stock become more apparent. That is when you actually need to start
asking questions about what exactly is wrong with the stock. Not all such cases
could imply a weak stock, but it is always better to be safe rather than sorry.
That is the crux of this measure and the LKP Research page is meant to act as an
advance warning system for traders and investors.