Markets Rejoiced the mega merger announcement of Ranbaxy and Sun pharmaceuticals on 7th April 2014 but the real action was happening in the prior week and somebody made fortune by having an insider line in this deal.
The stock shot up more than 25% in the prior week on very high volumes but very low delivery indicating speculative built up of position prior to the merger announcement.
Delivery on the National Stock Exchange was around 12 per cent of traded volume on 2nd, 3rd and 4th April when the stock witnessed nine per cent, 5.1 per cent and 8.2 per cent respectively. The closing on 4th April was less than Rs 3 from the share price in the deal.
The average value of Ranbaxy shares changing hands since the beginning of the calendar year was Rs 149.84 crore while the average from Wednesday to Friday has been Rs 532.52 crore.
Insiders knew about the fact that the deal will be announced over the weekend and they could make a killing by buying stocks in margin and futures. This is a clear cut scene of active insider trading and SEBI should investigate this matter rigorously, nullify the gains made by the insiders and punish the offenders. This will not only discourage insider trading in India but will also set an example of transparency and reliability when it comes to capital market regulation in India.
Also Read: SEBI New Insider Trading Rules