Short-sellers piggyback on YES Bank with borrowed shares

PALAK SHAH Mumbai | Updated on July 10, 2020 Published on July 10, 2020

Nearly 5.8 crore shares were traded on the NSE and BSE combined on Friday   -  Nagara Gopal

Punters take advantage of FPO discount price

After a lull of a few weeks since it was removed from the futures and options (F&O) segment in May, the YES Bank counter is again witnessing heightened trading activity.

When YES Bank was in the F&O segment, it was a short-seller’s delight as there was never a dearth of bad news in the counter. Despite not being a derivative stock, savvy traders on Dalal Street have figured a way to short sell the shares, leading to a spurt in its trading volumes in the past few days.

At the start of the week, markets were agog with rumours that YES Bank would be announcing a floor price of its follow-on public offer (FPO) at a substantial discount to the market price. For those who got wind of the news, YES Bank presented another short selling opportunity.

Usually, short and long positions can be initiated in the F&O segment but a few savvy players used the stock lending and borrowing (SLB) window of the exchanges to short-sell YES Bank shares, brokers said.

For the past few days, in the SLB segment, YES Bank shares were quoting at a premium, which rose to around ₹8 on Friday. Simply put, punters were ready to pay that much premium to borrow YES Bank shares from those who hold it. The borrowers then sold them in the open market with the intention of buying the shares back when the price fell and squaring off their position by returning them to the lender. The difference between the sell and buy price could be pocketed. Even when the broader markets and other banking stocks saw prices move up, the share price of YES Bank has been moving down this week.

YES Bank was trading at above ₹26 at the start of the week but fell to touch a low of ₹24 on Friday, which is more than 15 per cent fall as short sellers made hay. The news on Friday that YES Bank had set a floor price of ₹12 for its FPO is sure to give the short sellers windfall gains. There is very little float of YES Bank in the market as its shareholders are restricted from offloading 75 per cent of their holding for three years due to an RBI imposed lock-in this year.

Nearly 5.8 crore shares were traded on the NSE and BSE combined on Friday. Data on the exchanges showed there was nearly twice the spurt in Yes Bank trading volumes on Friday from the previous trading sessions.

Follow us on Telegram, Facebook, Twitter Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on July 10, 2020
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.