Murmurs of de-merger, public issue spark activity by hedge funds
Massive short-covering is pushing up shares of Anil Ambani’s Reliance group of companies.
Market players say domestic punters and top Singapore-based hedge funds are cutting short positions in the counters. This was after Ambani’s decision to re-brand his group’s corporate identity to ‘Reliance’ from ‘Reliance ADAG’ and align it with the brand under which his elder brother, Mukesh Ambani, operates.
“There is huge short-covering in all Anil Ambani-led company counters by proprietary traders. The idea behind re-branding is mainly to align the telecom business with Reliance Industries. It will not be surprising if Anil Ambani’s telecom business is taken over by Mukesh,” said independent equity advisor S P Tulsian.
Reliance Infrastructure and Reliance Communication, both constituents of equity benchmark indices Sensex and S&P CNX Nifty, have risen around 10 per cent in the past two trading sessions. While Reliance Communication is up 23 per cent from its annual low of Rs 119 on December 10 last year, Reliance Infrastructure has risen 14.8 per cent from its low during the period.
In the past two trading sessions, Reliance Broadcast has gained 10 per cent, Reliance Power three per cent, Reliance Capital four per cent and Reliance Media Works 4.7 per cent.
| ON FIRE Stock price (In Rs) on Jan 3 | ||
| Company | Price | % Chg* |
| Rel Broadcast | 88.30 | 4.99 |
| Reliance MediaWorks | 230.45 | 2.86 |
| Rel Infra | 862.50 | 2.43 |
| RelCapital | 681.75 | 2.05 |
| RComm | 147.90 | 1.93 |
| Rel Power | 158.85 | 0.47 |
| * Change over the previous close Compiled by BS Research Bureau | ||
Earlier
At the beginning of this year, large funds went short (bearish) on both the Reliance groups due to the fight between the two brothers.
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Selling in Reliance counters was high as mutual funds and foreign institutional investors, who held these stocks in large quantities, made losses as the brothers fought over gas sharing agreements in the court and there was uncertainty in the business.
However, while Reliance Industries managed some gains after winning the court battle, followed by a surge in crude oil prices in November and December last year, Anil Ambani-led stocks lost further ground.
“Apart from a major stake sale in Reliance Communication, the markets are flooded with news that Anil Ambani is planning a de-merger of the insurance business and a public issue. This has led him to re-brand his corporate logo and align it with that of his brother,” said Kishor Ostwal, the managing director of Mumbai-based CNI Research.
Investor perception had turned negative against the ADA Group after the listing of Reliance Power. The issue was one of the highest subscribed initial public offers in India. However, leveraged fund managers and retail investors burnt their fingers when the shares were listed significantly below the issue price.Investors confidence in Anil Ambani group companies was shattered.