Shares of Zee Entertainment Enterprises Ltd are expected to open significantly lower on Tuesday, following the termination of its merger with Sony Corp. group’s Indian entity. This unexpected development has sparked block deals and the liquidation of long positions.
Various mutual funds and insurance companies hold a significant stake in Zee Entertainment Enterprises Ltd. Notably, mutual funds such as Aditya Birla Sun Life MF, Kotak MF, ICICI Prudential MF, and Nippon India MF collectively hold 32.49% of the company’s equity. Additionally, insurance companies like Life Insurance Corp., SBI Life, and HDFC Life Insurance Co. own 10.66% of the company. Foreign portfolio investors, including Norges Bank and Vanguard, hold 28.19% of the company’s equity as well.
Market analysts predict that there may be a surge in block deals given the high institutional holding in the stock. Alongside cash sales and long liquidation, there could also be a significant increase in short positions, ultimately dragging the stock down even further.
The predicted 10% gap-down opening could potentially lead the stock to plummet to ₹208.26 initially. Specified stocks are traded on the cash and derivatives segments of exchanges like NSE and BSE.
Rajesh Baheti, director of Crosseas Capital, expects the stock to test ₹200 a share, a significant drop from the closing price of ₹231.40 on Saturday.
However, there are concerns about the influence of minority shareholders. Baheti wonders how a person with less than 4% shareholding was able to derail the merger, given the presence of substantial institutional holding.
Traders who are long on the stock are facing challenges due to the stock being under a ban on the derivatives segment. This ban prohibits the initiation of fresh futures and options positions unless a penalty is paid. Consequently, those bullish on the stock futures contracts are even forced to sell them, adding to the downward pressure on the stock price.
Currently, market experts believe that the ban may persist, allowing bearish bets to be initiated by paying a daily penalty of ₹5,000 per lot. Although long liquidation can bring down outstanding positions and potentially lift the ban on Wednesday, any fresh creation of short positions could once again put the stock under the ban period.
The stock has been under a derivatives ban since 11 January, when its aggregate open positions exceeded the market-wide position limit stipulated by the exchange. As a result, longs have been rapidly liquidating their bullish positions, with the active futures contract falling from 111.3 million shares on 10 January to 86.2 million shares on 20 January, while the price fell from ₹260.9 to ₹230.6 over the same period.
In conclusion, the termination of the merger between Zee Entertainment Enterprises Ltd and Sony Corp. Indian entity has sent shockwaves through the market. As investors brace for significant losses, the company’s stock is poised to take a significant hit.
FAQ Section:
1. What is the reason for the expected significant drop in the share price of Zee Entertainment Enterprises Ltd?
– The drop in share price is due to the termination of its merger with Sony Corp. group’s Indian entity.
2. Who holds a significant stake in Zee Entertainment Enterprises Ltd?
– Mutual funds such as Aditya Birla Sun Life MF, Kotak MF, ICICI Prudential MF, and Nippon India MF collectively hold 32.49% of the company’s equity. Insurance companies like Life Insurance Corp., SBI Life, and HDFC Life Insurance Co. own 10.66% of the company. Foreign portfolio investors, including Norges Bank and Vanguard, hold 28.19% of the company’s equity.
3. What are block deals and why are they expected to occur?
– Block deals are large transactions of a company’s shares between two parties outside the normal exchange mechanism. They are expected to occur due to the high institutional holding in Zee Entertainment Enterprises Ltd.
4. What is the expected opening price for Zee Entertainment Enterprises Ltd’s stock?
– Market analysts predict a 10% gap-down opening, which could potentially lead the stock to plummet to ₹208.26 initially.
5. Why is the stock under a ban on the derivatives segment?
– The stock is under a ban on the derivatives segment because its aggregate open positions exceeded the market-wide position limit stipulated by the exchange.
Definitions:
– Block deals: Large transactions of a company’s shares between two parties outside the normal exchange mechanism.
– Derivatives segment: A segment of the stock market where financial instruments derived from underlying assets, such as futures contracts and options, are traded.
– Institutional holding: The ownership of a company’s shares by financial institutions such as mutual funds, insurance companies, and foreign portfolio investors.
Suggested Related Links:
– Zee Entertainment Enterprises Ltd Official Website
– Bombay Stock Exchange (BSE)
– National Stock Exchange of India (NSE)