Arbitrageurs try to do an IPCL with GAIL, ONGC offerings

Arbitrageurs seem to be playing the shorting game with divestment stocks once again, and this time around, the focus of attention is ONGC and GAIL shares.

In the IPCL issue, they short-sold in the futures segment only to bid heavily in the primary issue, thereby creaming the difference.

A similar trend is now being seen in the ONGC and GAIL counters. In the futures segment yesterday, there was substantial shorting in these stocks, which dragged their closing prices down.

The ONGC futures closed at Rs 748 on the National Stock Exchange compared with its spot rate of Rs 757.55. And GAIL ended at Rs 203.35 in the futures segment compared with Rs 204.05 in the cash segment.

Sources said arbitrageurs were more active at the GAIL counter due to the timing of the issue.

"The ONGC float will open on March 5, the closing date of the GAIL offer. Therefore, the possibility of getting allotment or refund (a process that normally takes at least 15 days from the close of issue) before the expiry of the March futures is good in the case of GAIL. The March futures will expire on March 25," a source pointed out.

Market experts said the Centre's drive to mop up Rs 15,000 crore through the divestment of its shares in a handful of companies could have attracted greater arbitrage activity had there been futures trading in the other divestment candidates namely IBP, Dredging Corporation and CMC.

The arbitrageurs made a killing on the IPCL stock last week by simultaneously bidding though the public issue and shorting futures.

Market sources said the arbitrageurs shorted the stock in the range of Rs 182-185 on Friday, the closing day of the issue. They would get allotment at Rs 161.50 making a clean Rs 20.50- 23.50 per share.

Sources said taking the cost of financing into account, the arbitrageurs stood to gain 30 per cent.

Senior brokers said the hectic arbitrage in futures over the past couple of days reminded them the flourishing business during the open outcry system when a stock was traded at different rates on two bourses.

The traders used to buy a share at lower rate at one exchange and sell it through its counterpart on another. Price quotations at the front-running bourses "" Mumbai and Kolkata "" were different from those on bourses in Jaipur, Ludhiana, Magadh and Uttar Pradesh.