Breaking A Bear-Hug

Just two months ago, under conditions of anonymity, two of the top bear operators of the Bombay Stock Exchange (BSE), said to be close to Dhirubhai Ambani's arch-rival Nusli Wadia, had arrogantly claimed to Outlook : "We've just started. Reliance will fall below Rs 150. Just wait and see." The incredible bull run, it appears, was the Ambanis' answer to the bear cartel. Says NSE member R.G. Bhalla: "At a time when the entire Reliance group is on the defensive from a multi-pronged attack, the sudden rise of its scrip definit-ely hints towards forces outside mere fundamentals of demand and supply."

 A decade ago, Dhirubhai had smashed the Manu Manek-led anti-Reliance bearcartel, using exactly the same strategy that seemed to have been applied this time. Reliance has been constantly complaining to the BSE—and later to the SEBI—about "vested interests at work on the Reliance scrip". Market sources believe the beleaguered group, tired of complaining, decided to take matters into its own hand. Says Sandeep Ghate, a director in a non-banking finance company: "It is hardly a secret that Reliance Capital is masterminding the bull spree in the scrip." Adds investment consultant S.M. Menon: "The Reliance group companies decided to do circular trading amongst themselves on the RIL scrip. It's a no-gain-no-loss operation where transactions amongst the group companies offset any worthwhile squaring up."

 The buying spree began on Friday, February 2, and continued on Monday and Tuesday. Says an NSE member: "The idea was to catch the bears unawares. Since Tuesday is the NSE's settlement day, the bulls started making their buying bids on Friday and peaked it on Monday. Once the price rose to Rs 230, rumours claimed the bears would fall short by almost 40 lakh shares, which would then have to be auctioned at a hefty price." Which brought even more buyers into the market.

However, only 3.8 lakh Reliance shares were auctioned at a price of Rs 214.85. Scurrying bears were also helped by a strange coincidence. The BSE had to postpone its pay-in day for settlement 21A of vyaj badla deliveries of shares, due to a computer malfunction. While the BSE and software firm CMC are blaming each other for the mishap, punters are betting that the 'accident' occurred to help the bears square up on the NSE whose settlement was just a day later on Tuesday.

Through all this, rumours ran amok. Bears were assisted by wild stories ranging from Dhirubhai's arrest to Manmohan Singh's resignation to L.K. Advani's assassination, and the bulls by news of FIIs buying Reliance heavily. Says Rajiv Vij, vice-president (marketing), Templeton India, which has picked up large chunks of RIL shares recently: "It's quite possible that the news about FIIs picking up Reliance shares was used to create a demand. We've been mopping up RIL shares over a couple of months and not just in the past week. " However, despite the rumours, the fact remains that when delivery time neared, orders to square up also started pouring in. On February 6, in the last one-and-a-half hours of trading, the price crashed to Rs 197.50 on selling pressure. Says Ghate: "When it was clear that the deliveries would be made, the bulls also gave in." So, at the end of round one, no clear winner could be spotted.