panch-tattva talk…low open interest


This is a crucial juncture for the markets and surprisingly the open interest in Futures and Options is very low. It is just 2.26 crs in Nifty Futures and 4.75 crs in Nifty Options, in case of stocks it is 105.91 crs/9.52crs for futures/options. This indicates that the option writers are wary of writing options. Therefore while public is OK with making further investments, the organised playerd do not want to expose themselves. Public’s investment flows are taking place in two ways ie directly and through ULIPs and MFs. I have seen that a large number of commoners consists of people who are willing to take risk for big gains. This is particularly true of people with reliable income stream.

The QIP route is being increasingly resorted to by the corporates. This is good in a way that it increases the gross market cap and eventually deepen the markets but this makes it difficult to judge the impact of QIP on the prices of scrips which are raising money through QIP. Like for example ‘bajajhind’ is going to raise about Rs700 crs at around Rs204/- per share through QIP. Now some would consider it a bullish factor as the equity money is coming to company with considerable premium on it. But I would consider it a bearish factor because of expansion of equity base and the new money has not been taken for any concrete expansion plan. So, it is case of management trying to have comfort of some liquid money in hand. This money will have to be serviced out of post tax gains rather than pre-tax gains (in case of loans). Now, the moot point is to find an answer to the question ‘as to why management opted for equity fund expansion while the sugar scenario is optimistic and increased earnings will be available to retire debt’. Clearly, what we know, management knows better. It definitely knew best when it rewarded itself with preferential allotment (read earlier posts about ‘bajajhind’). After this QIP issue, if successful, the sharholder will have comfort of share prices maintaining in a range of 176/- to 215/- but the rise will be very strenuous.


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