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Nifty May futures were ata premium of The market, which moved between positive and negative zone in early trade, surged in the second half of the trading session led by rally in information technology and cement stocks.
The person s buying or selling knows that the same number of shares at the same time and for the same price will be entered to neutralize the transaction. Hence, these trades do not represent a real change in beneficial ownership of the security.
The only intention behind such buying or selling is raising or depressing prices of the underlying securities by increasing trading volumes. The participants involved in such trades make use of their prior knowledge and enter orders knowing that those orders will be covered by reverse orders of the same size, at the same time and price.
This increases the trading volumes in the underlying security and generates interest from other investors. When trading volume in a particular script increases, it leads other investors to believe that something big is afoot such as a merger or an acquisition and that the interest in the underlying security is genuine.
In short — the intention of those who initiate circular trading is to con investors and traders into buying or a selling the operated script.
In the above example, each subsequent trader is willing to buy the stock at the previous traders sell price to generate high trading volumes. For example, if there is any news on the issuance of bonus share by a company, the traders involved in circular trading may enter into matching deals among themselves i.
As the trading volume increases, other investors will start buying the stock at which point those who initiated the circular trades will slowly start booking profits and exit from the transactions while other investors are caught unaware of the real situation.
Currently he is debarred from trading in the Indian stock exchanges till The involved brokers were Mansukh Securities and Finance Ltd. Together, they deflated the share price from Rs. Shares of Sun traded in the range of Rs to Rs during that period, after which shares slumped to as low as To prevent circular trading in the stock market, SEBI has introduced price filters: Intraday price bands permits the stock to be traded within a range during a trading session.
It aims at preventing intraday price swings. Inter week price band has a wide range within which stocks are permitted to be traded in a week. It prevents huge swings in prices rippling into the next settlement cycle. Margins are additional filters applied by the stock exchanges to curb the price volatility.
For every transaction undertaken by the broker he has to deposit a margin amount to the stock exchange. The margin amount paid is used as a tool to discourage speculative and circular trading.
Leave your Whatsapp message or Email at rajat sanasecurities. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities.
Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.Mansukh Securities And Finance Limited was founded in The company's line of business includes the purchase, sale, and brokerage of monstermanfilm.comon: New Delhi, , India.
Stock Trading Analysis by Mansukh Investment and Trading Solutions 28/4/ views. Stock Trading Analysis by Mansukh Investment and Trading Solutions 28/4/ at the end of this report For Private circulation Only For Our Clients Only Mansukh Securities and Finance Ltd SEBI Regn No.
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Abhilash Sarmah. Derivatives Analyst at Mansukh Securities and Finance Limited. Mansukh Securities & Finance ltd. Banaras Hindu University.
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