The grey market — or dabba trading — for equities became active in Gujarat, Rajasthan, Delhi and Maharashtra immediately after the country’s top private sector company, Reliance Industries Ltd (RIL), announced a 1:1 bonus issue and a 130 per cent dividend.
In addition, the Global Depository Receipts (GDRs) of the company rose 5.5 per cent after the announcement, from $89.90 at around 15.22 hours to $94.80 at 17.59 hours, indicating that the stock could move up when it opens for trading in India on Thursday.
Those traders who would want to ride a likely RIL rally after the bonus and dividend announcement and believe that the stock would witness a gap-up opening on the exchanges on Thursday, were buying the share in the grey market on Wednesday.
As a result of this demand, RIL shares were quoting at a premium of Rs 150 to Rs 200 on its Tuesday’s closing price of Rs 2,099 on the Bombay Stock Exchange (BSE), grey market sources said. Following this, the key domestic benchmark index — Nifty of the National Stock Exchange (NSE), the contract of which are traded in the futures market — was quoting at a premium of nearly 80 points from its closing of 4,985 on Wednesday. However, the futures index of Nifty listed on the Singapore Stock Exchange, which closes at 6 pm, stood at 4,990 level.
RIL has the highest weight of around 16 per cent in the 30-share Sensex and 10.88 per cent in the 50-share Nifty. However, some company analysts — who did not want to be named — are of the view that the stock could remain volatile in the coming days once the Supreme Court hearing starts this month on the gas dispute between RIL and Reliance Natural Resources Ltd.
Also, RIL is sitting on treasury stock of over Rs 10,000 crore, which Mukesh Ambani is likely to sell in the next 12 to 18 months, said analysts.
The turnover in the grey market could easily cross Rs 50 crore on Wednesday, said sources. The last time the grey market had become active was when the Congress party won the elections in April this year and the results were announced on a Saturday, when markets are closed. The turnover in this market had crossed Rs 500 crore then and the benchmarks had hit the 20 per cent upper circuit when markets opened for trading officially on Monday.
Dabba trades are not executed on the stock exchange, but done in the books of dabba operators who are a cartel of stockbrokers. Punters take positions in this market as the settlement is done in cash and the margin requirement is not more than 10 per cent. Currently, operators running their books include prominent Mumbai-based market players and a few brokers from Gujarat and Rajasthan.
