Big traders wary of playing the markets

With the equity markets remaining uncertain during the first half of June, even the bulk traders, who deal in huge blocks of shares, have found it better to adopt a wait and watch approach.

In an interesting tale of investor behaviour, these bulk traders were most active when the markets were choppy in May, but when relative calm descended on the markets, they chose not to venture out.

In May 2004, block deals valued at Rs 1,076 crore (Rs 10.76 billion) were done covering of 32.02 crore (Rs 320.2 million) equity shares.

But in the first fortnight of June, the block deals whittled down to Rs 191 crore (Rs 1.91 billion). In April 2004 total 31.53 crore (Rs 315.3 million) shares valued at Rs 681.89 crore (Rs 6.818 billion) were transacted in block deals.

Market analysts say one reason for this decline could be the fall in market liquidity: the fall in daily traded volumes has impeded block deals. The major buyers who usually indulge in  block deals -- financial institutional investors and mutual fund -- have reduced their market activities.

In fact, domestic mutual funds were net sellers of equity to the extent of Rs 1,047 crore (Rs 10.47 billion) while FIIs were net buyers of only Rs 650 crore (Rs 6.50 billion) till June 17.

In June so far, the FIIs have done block deals worth a meagre Rs 29.22 crore compared to Rs 1,056 crore in May and Rs 510 crore (Rs 5.10 billion) in April. Block deals by the mutual funds declined to Rs 6.44 crore (Rs 64.4 million) in June from Rs 36.44 crore (Rs 364.4 million) in May and Rs 77.27 crore (Rs 772.7 million) in April.

High net worth individuals stayed away from block deals, doing business of only Rs 2.26 crore (Rs 22.6 million) in June as compared to Rs 16.04 crore (Rs 160.4 million) in May and Rs 81.35 crore (Rs 813.5 million) in April.

The brokerage houses, however, found the share prices in June most lucrative for block deals. Brokers completed block deals of Rs 139.47 crore (Rs 1.394 billion) in June on their own account, compared to Rs 18.39 crore (Rs 183.9 million) in May and Rs 27.11 crore (Rs 271.1 million) in April.

H J Securities made deals of Rs 126.50 crore (Rs 1.265 billion) involving three companies. H J Securities bought 14.44 million shares of Power Trading Corporation for Rs 71 crore (Rs 710 million), 10.3 lakh (1.03 million) shares of Dishman Pharma for Rs 50 crore (Rs 500 million) and 3.11 lakh (311,000) shares of Datamatics Technologies for Rs 5.40 crore (Rs 54 million).

The major FIIs in the block deal market include AOF HS Mauritius, Citigroup Global Markets Mauritius, Emerging Market Management, Government of Singapore Investment Corporation, Lloyd George Investment Management and Merrill Lynch Capital Market.

Merrill Lynch Capital Market Espana was the most active FII. The FII bought equity shares of Monnet Ispat, Hitachi Home and Life Solutions, Kopran and sold shares of Jindal Steel and Power, Matrix Laboratories, e-serve International and Uniphos Enterprises during April, May and June.

Goldman Sachs Investment Mauritius, bought 34.66 lakh (3.466 million) equity shares of Biocon at Rs 605 per share. It sold 2.61 lakh (261,000) equity shares of Balaji Telefilms and 3.87 lakh (387,000) shares of Pantaloon Retail during the quarter.

Citigroup Global Markets Mauritius purchased 9.07 lakh (907,000) shares of Max India, 6.76 lakh (676,000) shares of Bajaj Auto and 1.18 lakh (118,000) shares of Swaraj Engines from the open market through block deals.