The Hindu Business Line : NEPC India: Sur`pricing' arbitrage

STOCK market investors using price arbitrage to make money is a well-known fact. But an arbitrage opportunity of over 200 per cent is virtually unheard of on Indian bourses. NEPC India provides such an arbitrage opportunity between the BSE and the NSE.

On the BSE, the stock price of NEPC India today closed at Rs 2.49 and on the NSE, at Rs 8.50, a difference of around 240 per cent.

What is more interesting is that this trend in the scrip is seen for the last three days, ever since the security of NEPC India was listed on BSE. On the NSE, the shares of the company are listed for long time and traded frequently. However, there is hardly any trading volume on the BSE as the stock is locked in upper circuit immediately after the market opens.

Through arbitrage, market players buys shares at a lower price on one exchange and sells on another at a higher price. Normally market players have arbitrage opportunity of 2-3 per cent.

Several brokers who have interest in the stock said this is due to BSE placing the stock under circuit filter limit on Tuesday when the stock was re-listed on the exchange's "Z" group.

However, BSE officials declined to comment on the exchange decision to place the stock on circuit filter limits on first day of listing. The BSE's spokesperson said: "The exchange does not comment on price movement of companies shares".

Normally on the first day of listing of equity shares of a company, stock exchanges keep the circuit filter open in order to have realistic price level for the security in line with SEBI regulations.

Keeping in line with this regulation, the BSE today issued notice to its members for Lakhani India shares saying that the daily circuit filter in the equity shares of the company (Lakhani) is being kept open on September 17, in order to enable the members to deal in the scrip at a realistic price level.

However several brokers are surprised that even after three days of trading, the BSE has not corrected the huge price differential in NEPC India shares.