RIL stock sees unusually large F&O bets ahead of Jio IPO: Report

Their exposure increased over the following fortnight, with only marginal reductions towards the end of last week. The scale of these positions is unusual even by Reliance’s historical standards. Analysts told Mint that they could not recall a single client holding more than 3% of the company’s MWPL, including during Meta’s investment in Jio Platforms in 2020 and the market turmoil triggered by the Covid-19 pandemic.

The rationale behind the trades remains unclear. However, analysts believe the recent decline in Reliance shares may have encouraged traders to position themselves for a potential recovery. The stock has underperformed the Nifty amid sustained foreign portfolio investor (FPI) selling, rising crude oil prices and a weakening rupee. The activity comes ahead of Jio Platforms’ Rs 30,213-crore IPO, scheduled to open on Wednesday and close on Friday.

Kruti Shah, quant analyst at Equirus Securities, described the positioning as exceptionally rare, telling Mint that two clients had taken large leveraged positions in a stock that, to her recollection, had not featured on the MWPL list in this manner. Shah said persistent FPI outflows and the sharp correction in Reliance shares could have prompted the traders to bet on a technical rebound or a possible re-rating following Jio Platforms’ listing later this month.

Reliance shares have gained around 2% since the end of September, when the two participants began building their positions. The stock closed at Rs 1,187 at the end of September, touched a 52-week low of Rs 1,152.20 on October 13 and subsequently recovered to Rs 1,211 on Friday, ahead of the IPO’s anchor investor bidding scheduled for Monday. According to NSE data, the first participant, identified as Client 1, entered the list of entities holding more than 3% of Reliance’s MWPL in futures and options contracts on October 1.

The position represented 3.32% of the company’s MWPL, which stood at 65.87 crore shares. The second participant appeared on the list on October 9, with a position equivalent to 3.02% of the MWPL. Client 1 subsequently increased its exposure to 3.41% by Thursday before reducing it to 3.35% on Friday. The second trader raised the position to 3.17% by October 14 and trimmed it slightly to 3.15% by Friday.

Shrikant Chouhan, executive vice-president at Kotak Securities, said some investors and large traders could be positioning for sharp price movements ahead of the Jio Platforms IPO. He also described the leveraged bets on Reliance as extremely rare. The positioning comes at a crucial time for Reliance, as Jio Platforms’ proposed listing could unlock value for the conglomerate. A separate listing would establish an independent market valuation for Reliance’s largest digital asset and potentially narrow the conglomerate discount applied to its shares, according to a recent brokerage report.

In a recent note, Religare Broking said Jio Platforms’ listing could trigger a re-rating of Reliance Industries by providing an independently traded valuation for its largest growth asset. According to the brokerage, this would improve transparency around Reliance’s sum-of-the-parts valuation and could structurally reduce the discount at which the diversified conglomerate trades. Under exchange rules, the MWPL of a stock is set at 15% of its free-float shares or 65 times its average daily delivery value by quantity, whichever is lower.

The MWPL list currently covers 137 of the 213 stocks eligible for futures and options trading. Other prominent companies on the list include Jio Financial Services, Tata Steel, Wipro, Sun Pharmaceutical Industries and Hindalco Industries. Large positions in derivatives can be held by domestic and foreign institutional investors, high-net-worth individuals and proprietary trading firms. Such exposure may be used to hedge existing portfolios or to speculate on anticipated price movements.