Buyback fails to bolster stock

Despite the buyback announced at Rs 570 per share, the Reliance Industries stock was the biggest loser among Sensex stocks, falling 1.29 per cent to close at Rs 516.85. Reliance Energy, the other Reliance group scrip in the Sensex basket, was down 0.71 per cent to Rs 526.

Deven Choksey, managing director at KR Choksey said, "Though the buyback price was good, uncertainty over ownership and management issues played on the market sentiment."

In early trades, the counter hit a low after vice-chairman and managing director Anil Ambani said considering a buyback at this stage was completely inappropriate as there were several other issues that the group faced and they needed to be addressed.

But the scrip recovered in afternoon trades after the company announced the buyback price "not exceeding Rs 570 per equity share payable in cash", up to an aggregate amount not exceeding Rs 2,999 crore.

The sharp spurt in prices immediately after the announcement could not be sustained and the stock kept slipping through the rest of the day.

Market sources were at a loss to explain why the scrip had closed 1.29 per cent lower than Friday's close.

A few brokers said since the company is buying back its shares in the open market, there is no guarantee that it will actually buy a single share, as in the past.

Other brokers, who spoke on condition of anonymity, reiterated Anil Ambani's statement that "there is more to it than meets the eye".

But brokers confirmed that a report that the market regulator, the Securities and Exchange Board of India, was looking into price and volume movements on the counter also weighed on the sentiment.

On the National Stock Exchange's futures and options segment, the Reliance December futures contract was the most actively traded stock futures, with 44,420 contracts traded on the counter.

However, the open interest declined by 10.68 per cent or 13.54 lakh shares. Reliance December futures price fell by 1.45 per cent to close at Rs 516.50, against Rs 516.85 in the cash market closing.

The biggest action was seen in the options segment as traders tried to protect their downside on the counter.

"The counter now seems to be driven by news, investors are protecting the down side by actively trading in options," an NSE dealer said.