Before Sebi report, entity takes ₹600 cr AEL position

livemint.com:

MUMBAI : A single market participant took a derivatives position worth an estimated ₹600 crore in Adani Enterprises Ltd (AEL), flagship of the Adani Group and a Nifty 50 stock, just days before India’s markets regulator submitted its status report on the Adani probe to the Supreme Court on 25 August. While it’s not known whether the position is a hedge or a punt, market experts said such positions are normally taken in anticipation of a sharp price move based on an event. Designated ‘Client 1’ by National Stock Exchange (NSE), the participant initiated a position of 2.24 million shares, or 3.04% of AEL’s marketwide position limit (MWPL) of 73.7 million shares on 22 August.

Based on the closing price of the AEL active futures contract on that day, the cost of the position is ₹607.25 crore. However, the equivalent cash margin a client has to put up to trade an AEL derivatives contract is 65%, or ₹395 crore, in this case. This position is termed open interest, as it signifies an outstanding long or short position.

The last time a client held over 3% of AEL’s total futures and options positions was on 31 March after a sharp recovery in its share price after marquee asset manager Rajiv Jain of GQG Partners first invested $1.87 billion in four Adani group companies, including in AEL, earlier that month. A futures or an options contract facilitates the purchase or sale of an underlying security at a fixed price for delivery on a future date. If the client has a buy position and the stock rises at expiry (last Thursday of the month), she makes a gain.

If the stock falls, she loses. Similarly, if she has a sell or short position and the stock corrects by expiry, she gains. But if the stock rises, she loses.