There are many examples, of some people benefiting more than others in stock market trades. A stock-moving deal is great news for some shareholders and often even greater for other market participants. These other participants are a select few, who may have an inkling of the deal and make merry, illegally, just ahead of the announcement.
Recent trading activity in ABC Bearings Ltd. is one such case in point. News came in late Tuesday night that Timken India Ltd. is merging ABC Bearings Ltd. with itself, and calculations show that the ratio is skewed heavily in favour of ABC Bearings. Which is fine, because that's the premium that Timken is willing to pay for ABC.
What is eye-catching is the trading activity in the ABC stock. The share price jumped 20 percent on Tuesday and stayed locked at that upper-circuit level with over one lakh shares traded – almost four times the 2-week average volume.
The delivery percentage stood at 77.48 percent, the top percentile of delivery on any given day for any stock.
To be clear, I'm not pointing fingers at anyone. Just wondering aloud. Often when such acquisitions are being struck, information chains can be porous and tongues loose.
Sure, some of you are yawning while reading this. Others are saying, “what's new, this happens every second deal”. Maybe you investors are now inured. Maybe you don't grudge that someone else made some money on the “khabar” and you didn't get that fair chance.
But what if you held a stock and people with inside information sold it before a negative announcement took it down?
That's when it will really burn. Because you were denied an equal opportunity to exit and save yourself a loss.
It is to avoid these burn moments that you will hopefully join me in urging stricter regulatory vigilance by the stock exchanges and the Securities and Exchange Board of India to track abnormal trade or delivery volumes so that normal investors aren't left feeling cheated.
Niraj Shah is Markets Editor at BloombergQuint.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
