Cse Smells A Rat In Motorol Speciality Share Spike

Informed buying in Motorol Speciality Oils Ltd led to an extraordinary spurt in activity at the counter on all major bourses since the end of January, attracting an investigation by the Calcutta Stock Exchange (CSE).

Rumours of the company launching a buyback programme, which fueled the spurt in price and volume at the counter, were confirmed when the company said in a recent notice to the stock exchanges that it would consider buying back shares in a meeting on June 16.

The board meeting of the company to consider the issue was initially scheduled to take place towards the end of last month, but had to be postponed as some directors failed to turn up, and the company decided to discuss it only in the presence of the full board.

It may be recalled that similar spurt in activity was witnessed in Otis Elevators and Carrier Aircon stocks immediately preceding the announcement of their buyback offers, and earlier in the UTI Bank and Global Trust Bank shares prior to the proposed merger of the two banks. These subsequently were scrutinised by the Securities and Exchange Board of India (Sebi).

The spurt in activity in Motorol Speciality Oils, too, did not go unnoticed, as the CSE surveillance team, having learnt from its pitfalls, issued notices to a large number of brokers recently, asking them to disclose identity of their clients buying the stock. The details of the inquiry may be subsequently sent to Sebi.

The Motorol Speciality Oils stock has dipped below par, and the market expects the company to announce a buyback at a premium to the market price.

Since the margin of arbitrage is low and presumably the downside too, investors have been betting in large volumes.

Volume at the counter has been rising steadily since January end, and on most days exceeding one lakh on the Bombay Stock Exchange (BSE), which for the counter is pretty high. The same is true for CSE as well.

Average trading volume in the recent past has been hovering around 1.5-2 lakh on both the bourses. On March 30, 10.13 lakh shares of Motorol Speciality Oils were traded on BSE. The stock closed at Rs 8.10 on CSE today, with 1.48 lakh shares traded at the bourse.