Volume rise ahead of results!
Trends could be astonishing. One trend witnessed during the current year was that share prices of companies and their volumes (number of shares traded) started increasing as the date for declaring their financial numbers neared. Moreover, stock prices of companies were usually at their peak on their results day and fell after the announcement of results if the results were in line or below analysts’ expectations. However, other factors could also affect the movements.
An analysis of few quarters revealed that sensex and Nifty companies that stock prices of 38 companies (implied probability of 85%) started to increase around two weeks prior to their results announcement and moved up till their numbers were declared. Share prices increases are as high as 30%. There was nothing significant apart from approaching deadlines of their results announcements that made their stock prices shoot up.
Further, stock prices of companies were usually at their peak on their results day and generally fell the following day after their results announcement. This stands true even if the results are in line with analysts’ expectations and are not bad per se. This statement stands true for 28 of the 50 Sensex and Nifty companies that have declared their results thus far, a probability of around 60%. Much of this fall could be contributed to the over bought positions in these counters on account of expectations of good results. A further 16 stocks just hovered around their pre-result levels moving nowhere after the announcement of their results. But, counters got hammered if results were below market expectations or a profit warning was issued.
Volumes in all the counters too start to increase on account of increased interest on counters approaching results, but they shoot up enormously a couple of days ahead of the results. Volumes spurted around 5-35 times around the results day. But these are exceptional cases. On an average volumes increase 2-6 times and then fall back to average levels.