You are here: Home » Markets » News
Business Standard

Freak trade: Blue chip stocks see 'unusual' price rise on NSE

According to data provided by NSE, futures contracts of HDFC, Bharti Airtel, HDFC Bank, TCS and RIL jumped around 10 per cent each for a few nanoseconds in early trading

NSE | futures trading | Bharti Airtel

Samie Modak  |  Mumbai 

NSE, national stock exchange, nifty50

Futures contracts of five blue chip companies traded on the National Stock Exchange (NSE) saw unusual price spurt on Tuesday.

According to data provided by NSE, futures contracts of HDFC, Bharti Airtel, HDFC Bank, Tata Consultancy Services (TCS) and Reliance Industries (RIL) jumped around 10 per cent each for a few nanoseconds in early trading. This was seen in contracts expiring in September as well as October. In the case of HDFC and even November contracts were impacted.

For instance, the price of futures contracts of HDFC soared to Rs 3,135 even as the spot price was around Rs 2,850-level. Similarly, RIL skyrocketed to Rs 2,616 even as the spot price was around Rs 2,370. The prices in the cash segment for the five stocks were not impacted due to what many called “freak trades”.

“Some unusual trades were observed today which were executed by a trading member. The same is being examined by the regulatory team of the exchange. These trades were executed within the operating range permitted by the exchange,” said in a tweet.

Market experts blamed low liquidity caused by the new higher margin norms for the unusual trades.

“This month onwards, the have transitioned to 100 per cent peak margin requirement. As a result, during the start of the trade there aren’t too many pending orders in the system. The risk of large basket trade distorting prices has increased as liquidity is often low say at 9:15:003 am,” said Abhilash Pagaria, assistant vice-president, Edelweiss Alternative Research.

The new margin norms have increased the capital requirement for intra-day traders. This has reduced overall leverage in the system, said experts.

Also, brokerage firms are barred from providing any additional intraday leverages for both equity and derivatives trading. As a result, intra-day traders are required to fund the minimum margins (VAR+ELM for stocks and SPAN+Exposure for derivatives) from their own pocket.

SPAN is standard portfolio analysis of risk, VAR is value at risk, and ELM is extreme risk margin — metrics used to determine the risk to investment for a particular security.

“Many non-institutional traders have moved to the options segment as the lot sizes in the futures segment has increased. This is also leading to lower liquidity in the futures segment. I think as the get used to the new system, instances of freak trades will reduce,” added Pagaria.

In recent days and weeks, several traders have also complained about unusual price rises in the options segment.

Freak trade: Blue chip stocks see 'unusual' price rise on NSE

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, September 14 2021. 19:35 IST