Day trading sneaks into primary market

Day trading, which is predominantly a secondary market phenomenon, has made a back door entry into the primary market as well ""through the grey market route.

Take for instance, Power Grid Corporation, which will be listed next week is already being traded in the grey markets in Ahmedabad and Rajkot at a premium of Rs 24-25 a share. In day trading, transactions are squared off on a daily basis.

Signals from the grey market suggest that the share will be listed in the range of Rs.70-75 per share. The share was considered ideal for day trading as it is a public sector company and hence the promoters are not active in the grey market.

The issue size was also big and the institutional interest in the issue has been stupendous. Grey market is an unofficial market where price discovery of the IPOs takes place before listing and shares are traded at a premium or discount.

The day traders in Power Grid shares are mostly the same as those in the secondary market. The settlements can be daily or on their net positions on the day of listing.

If they are net buyers, then the broker who have sold shares will have to give them the shares on the day of listing. If he is a net seller, he is expected to buy shares and deliver to the broker concerned.

Another example of day trading in the primary market is that of the Satyam group-backed Maytas Infrastructure. The initial public offer of the company is on at a price band of Rs 320-370. The shares are being quoted in the grey market at a premium of Rs 190 per share.