Retail investors... The step sons

Does this graph strike a bell? Its is not the blood pressure reading of someone... Its the price chart of Reliance Petroleum for the past one year. It is quite possible that this graph definitely might have a strong correlation with the blood pressure of its retail shareholders. Reliance Industries has sold about 18 crore shares or 4 per cent in Reliance Petroleum (RPL) recently. The sale happened when the price was near its peak. This deal has hogged considerable media light and has opened more questions than answers. Consider the following facts in this deal:

1. With the rise in prices RPL, a refinery which is still under construction and to be ready by only next fiscal, has overtaken the combined shareholder wealth of the three PSU refiners-cum-marketers - IOC, HPCL and BPCL.

2. The modus operandi of the sale is still not known. Whether RPL shares were sold in small lots or in huge block deals to small investors or private equity firms is still a matter of conjecture. These details were neither available in the block or bulk trade details of BSE and NSE, nor was it put on the stock exchange notice board.

3. Reliance Industries communicated about this deal to the stock exchanges late on Saturday night. (Of course both the exchanges are closed on weekends)

4. Earlier this month, the RPL share was on the rise on a market rumour that Chevron could pay $6 billion for 21 per cent in RPL. The US oil major promptly repudiated the news, but Reliance was slack in denying it and RPL shares climbed northwards probably on this rumour, to a 52-week high of Rs 295. Mind you the sale happened sometime after this.

5. While all these were happening on one side, there were players who were building huge short positions (betting that the stock price will fall) in the derivatives segment. There were 16 crore shares position built up in this category (which is around 250-300% the normal levels). These short positions peaked on the same day, the promoters began selling shares. Of course we only know it post mortem. Needless to say that these guys must be laughing their way to banks.

Thats "transparency". RIL's communications post this sale are even more curious.. "The sale of RPL shares was conducted by transactions through the stock exchanges and has helped to further broad-base the shareholding pattern of RPL and is a bid to maximise overall shareholder value".. said the company statement.

"Maximize shareholder value".... thats a nice and neat phrase. At who's cost?

RIL made a profit of Rs 3662 crore in the deal... and as usual retail investors like you and me (thank god i am spared in this case) would have been caught on thier wrong foot.