Shares of Mumbai-based property developer HDIL plunged 14.3 per cent to end at Rs 96.25 on Wednesday, as institutional investors cut exposure to the stock after a top official sold a partial stake in the company.
HDIL’s Vice-Chairman and Managing Director, Sarang Wadhawan, sold five million shares on the National Stock Exchange yesterday, reducing his stake to 0.99 per cent from 2.19 per cent
Traders pounded the stock, which fell as much as 16.8 per cent earlier in the day. HDIL stock futures of the January series, which were the most actively traded contracts, saw a 56 per cent jump in open interest as traders created short positions.
Then, Wadhawan’s clarification on television channels that he sold the shares to fund a land acquisition prompted traders to cover a portion of the bearish bets, helping the stock to recover a bit.
Earlier in the day, the sell-off in HDIL was sparked by speculation that Wadhawan had sold the shares to meet margin calls by a Delhi-based financial services company. This could not be verified. Brokers said such talk was partly because the promoters had pledged 96 per cent of their equity as on December 31.
“The stock settled down after the company’s clarification that there would be no further sales or margin calls,” said S P Tulsian, a Mumbai-based investment analyst.
A theory doing the rounds is that a group of operators had sold HDIL stock futures yesterday, though analysts said the data on position build-up did not reflect any major changes on that day. “The build-up in short positions on Tuesday were like any other stock futures. A majority of the short positions were created today (Wednesday),” said Siddarth Bhamre, head-derivatives, Angel Broking.
In 2011, operators regularly went after shares of companies with high pledging by promoters, as these stocks were vulnerable to sharp falls. These traders used to build up huge short positions in stock futures of mid-cap companies with high pledged shares, causing panic, fuelling further selling in these.
The strategy here was to push the stock below the price at which the promoters pledged the shares that would trigger margin calls and force financers to dump the shares if the promoters will unable to bring in more cash or shares. GTL, GTL Infra, Orchid Chemicals, Pipavav Shipyard, Orchid Chemicals and S Kumars Worldwide were among stocks that have been beaten down in recent years. The promoters of most of these had pledged a majority of their holdings.
