The Oil and Natural Gas Corporation (ONGC) counter in futures and options (F&O) has been trading at a hefty discount to its cash market price. | |
| On March 5, when the ONGC public offer opened, ONGC March futures were quoted at Rs 801.55 when the cash market was quoting Rs 802.25. |
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| More significantly, the April futures contract was traded at Rs 788.80 as against Rs 802.25 in the cash market. April is important for the ONGC stock as the new shares are expected to be allotted in April. |
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| On Friday March 12, the discount continued with ONGC March futures closing at Rs 795.25 but April and May futures closed at Rs 773.00 and Rs 782.00 while the scrip closed at Rs 800.95 in the cash market. |
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| According to market sources, arbitrageurs have been subscribing to the ONGC issue at a price lower than the market price and, thereafter, selling in the F&O segment at a higher price, in the process raking in handsome returns. |
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| The oil giant is in the market with a public issue of 14.26 crore shares that will fetch the government at least Rs 10,000 crore. The shares are expected to be allotted in April. |
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| According to a F&O strategist with a domestic brokerage house, "The arbitrage option was played in most PSU stocks and was very much evident the way the IPCL stock was hammered in the cash market on Friday (when the shares were finally allotted)." The settlement of the current F&O cycle is due on March 25 and on April 29 for the next month. |
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| However, if this difference reverses by then, these traders may panic and be compelled to square off their sales at higher rates. They will have to also pay the mark to market and increased additional volatility margins. |
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