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There is some consensus in the markets that the recent correction has similarities to the one in May 2006. Today we identify stocks traded in the 'A', 'B', 'R' and 'Z' groups of the BSE and take a look at the volume trends pre and post the correction, and see if there is any correlation to the present correction.

Post-May 2006 correction, we saw volumes dry significantly for a long period of time. If one goes by that historical data, one may see volumes dry up a fair bit.

In the last 2-3 trading sessions including today, we have seen volumes go down by about 40% -both on the BSE and the NSE cash segment and on the F&O segment.

If one draws some parallels back to about May 2006, 10 days before the May 15 correction, one saw the NSE volumes average traded volumes at 24 crore, BSE average traded volumes was about 34 crore. The percentage of the 'A' group shares and these are the shares with usually the highest marketcap and most liquidity, was at 25%.

Next in rung – ‘B1’+’B2’ formed about 50% of the total BSE cash turnover and the ‘S’+’T’+’TS’+’Z’ group formed about 26%. The markets bottomed out somewhere around June 14, after 23 trading sessions and post-June 14 - from June 15 to about June 30, the NSE average traded quantity and the BSE average traded quantity reduced by about 50% for those 15 trading sessions.

Volumes and trades was concentrated primarily around those ‘A’ group shares and it went up to 25% to about 36% an the ‘B’+’B1’ group came down from about 49% to 44%; even the other remaining groups came down from about 27% to about 21%.

In July, the volumes shrunk even further and we saw the average volumes concentrated primarily around the A groups again. About 40% of volumes were concentrated on the blue chips ‘A’ stocks; with the largest marketcap.

And only after 2.5 months after the market had bottomed out, after the correction, did the volumes start picking up in August - both on the NSE and the BSE. We saw the ‘A’ group, ‘B1’ and the remaining groups form a similar sort of percentage to what they were prior to the May correction. In terms of absolute trading volumes, the volumes only picked up after seven months in 2007, they were back to those 2006 levels.

If we look at the 2008 correction, market started down trend around January 8 and ten days prior to that, NSE average traded quantity was about 48 crore and the BSE average traded quantity was about 74 crore shares and the ‘A’ group, as a percentage of BSE traded quantity, was 17%. The midcap stocks, primarily the ‘B1’ and ‘B2’ group formed about 51% - so a lot more trade has been concentrated on this midcap space in this rally. Going by the past data, it should take a fair bit of time for us to go back to those old volumes prior to this correction.

TRADING VOLUMES

10 Days Before May 15,'06
-NSE average traded quantity at 24.3 cr shares
-BSE average traded quantity at 34.4 cr shares

10 days Before Jan 8
-A group saw 25% of total BSE traded vols
-B1+B2 saw 49% of total BSE traded vols
-S+T+TS+Z saw 26% of total BSE traded vols

June 15-30, 2006
-NSE average traded quantity at 12.6 cr shares
-BSE average traded quantity at 17.35 cr shares

June 15-30, 2006
-A group saw 36% of total BSE traded vols
-B1+B2 group saw 44% of total BSE traded vols
-S+T+TS+Z group saw 21% of total BSE traded vols

July, 2006
-NSE average traded quantity at 10.13 cr shares
-BSE average traded quantity at 14.5 cr shares

July, 2006
-A group saw 39% of total BSE traded vols
-B1+B2 group saw 38% of total BSE traded vols
-S+T+TS+Z group saw 22% of total BSE traded vols

August, 2006
-NSE average traded quantity at 13.3 cr
-BSE average traded quantity at 18.9 cr shares

August, 2006
-A group saw 29% of total BSE traded vols
-B1+B2 group saw 45% of total BSE traded vols
-S+T+TS+Z group saw 26% of total BSE traded vols
-Trading vols returned to pre-May levels in 2007

10 Days Before Jan 8
-NSE average traded quantity at 48 cr
-BSE average traded quantity at 73.4 cr shares

10 Days Before Jan 8
-A group saw 17% of total BSE traded vols
-B1+B2 group saw 51% of total BSE traded vols
-S+T+TS+Z group saw 26% of total BSE

Source: Moneycontrol.com