Smart operators in RPL futures make a cool Rs 1,000 cr

Source : http://www.financialexpress.com/news/Smart-operators-in-RPL-futures-make-a-cool-Rs-1-000-cr/244312/
This Article was posted in Financial express on Wednesday, November 28, 2007 .
Being reposted here on request from readers.

A group of smart investors who took a short position in Reliance Petroleum Ltd (RPL) November futures have profited by over Rs 1,000 crore. According to informed sources, these players initiated shorts on the RPL futures counter at an average price of Rs 275 per share and above.

RPL stock closed at Rs 198, down 2.98%, in the BSE cash segment while the November series stock futures closed at Rs 196.70, down 3.44%, on the NSE on Tuesday.

The open interest position in RPL’s November series stock futures on Tuesday stood at 9.05 crore shares, down 1.17 crore shares (or, 11.47%) from the previous day and the stock was still under ban (it is expected to be freed from the December series).

The total OI in RPL is expected to be around 16 crore shares, including call and put options, of which 12 crore OI shares is in stock futures.

These players have also outsmarted RPL promoters Reliance Industries Ltd (RIL), who sold over 18 crore shares in the cash market at an average price of Rs 223 per share and earned a tax-free income of over Rs 3,800 crore. The players in RPL futures took an exposure of over Rs 3,600 crore by paying 20-25% margin in the range of Rs 600-700 crore and encashed over Rs 1,000 crore. Had RIL off-loaded its 4% stake at the lifetime high of around Rs 295, it could have added another Rs 1,000 crore to its kitty.

However, market players seem to think otherwise. Tejvinder Singh, derivatives analyst, Arihant Capital Markets said, “It is very difficult to execute a sell order of 18 crore shares and maintain the price level. The execution of the sell order must have taken at least two days and the price was bound to fall as the sale was based on delivery with an intention to pump in liquidity in the counter.”

“These were better informed people who had the courage to go short on counters like RPL. Looking at the current level of OI, they must be making hefty sums at the end of the November expiry even if they do not square-off their short positions,” he added.