YES Bank shares witnessed volatile swings on Thursday, as Dalal Street reacted to a number of rumours, ranging from an imminent QIP launch to a possible change in the lot size of the bank’s F&O contracts.
The stock was down nearly 4 per cent till midday but rebounded and jumped 10 per cent in afternoon trade, before closing the session 6.74 per cent higher at Rs 49.90.
“The market was abuzz with rumours that the bank is likely to announce its much-awaited qualified institutional placement (QIP) soon,” said an analyst with a top Mumbai brokerage. He barred naming and did not elaborate.
The QIP rumours gained ground after YES Bank CEO onTuesday Ravneet Gill said the lender “will raise capital at the very earliest.”
Last week ET had reported that the private lender was seeking an exemption from Sebi to raise funds under the QIP programme, as a backup plan to its ongoing efforts to sell a stake via preferential allotment.
Anup Chandak, Deputy Vice-President for F&O at Sharekhan, said there was talk in the market that the lot size for YES Bank, which is 2,200 shares now, is going to quadruple from next series. This could be the reason behind the volatility, as prospects of such a change led will be short covering as well as delivery-based buying, he said.
“Suppose you have one lot of YES Bank contracts, and the lot size becomes four times of what it is now. How will you roll over your position? Similarly, if you are short, and if you want to remain short, then you either go and be short four times or cover your position,” Chandak said.
Milan Vaishnav, Consulting Technical Analyst at Gemstone Equity Research, said he too heard the rumour about possible change in lot size, but said that his source is not reliable. He attributed the volatility to the uncertainty over the fundraising plan that the bank has been working on.
“Volatility is higher because of settlement and adjustment of positions amid a very uncertain future,” Vaishnav said. However, he agreed that the prospect of an F&O ban could be a contributing factor to the volatility.
A stock goes into an F&O ban period when the aggregate open interest is close to 95 per cent of the market-wide position limit. In such a case, no new position can be created but existing positions can be squared off.
Open interest refers to all outstanding buy and sell positions in the security or futures and options contracts. Stocks facing an F&O ban can cause huge losses to traders if they are caught unawares, as they may then need to square off positions at an unfavourable price.
India Ratings and Research on Wednesday downgraded its long- and short-term issuer ratings for Yes Bank and placed them on Rating Watch Negative (RWN) amid a delay in capital raising and uncertainty regarding the quantum. Lower current account deposits of the private lender, too, was cited as a trigger for the downgrade.
Source: Economic Times
