BAN on Reliance Industry Ltd.

SEBI(Securities and exchange board of India) banned Reliance industries along with 12 others from equity derivatives trading and also infused a penalty of Rs 447 crore, along with an annual interest of 12% since November 29,2007 taking the total amount to almost Rs 1000 crore.

The case related to alleged fraudulent trading in the F&O space in the securities of RILs subsidiary Reliance Petroleum.

ONE YEAR BAN

The ban will be in place for one year. This is a ten year old case as RIL earlier also asked SEBI to close the case but SEBI refused it.

About case

When shares of Reliance Petroleum was listed, RIL decides to offloads it’s 5% stake in it. For sake of this the 12 entities which are banned taken an adverse position in F&O, as they sold futures and increased the OPEN INTEREST.

 Sebi calculated Rs 513 crore by taking into account the net short positions in derivatives for all the days the 12 entities maintained during November 2007. As share price gown down in SPOT market profit was ultimately made in future positions. The regulator said on the basis of the analysis of the trading strategy adopted by RIL in the cash market during the month of November 2007, and specifically on November 29, 2007 — the expiry day of the November Futures of RPL — there has been a manipulation of the last half an hour settlement price.
SEBI examined all the deeds and in interest of the investor banned RIL and all those 12 entities.

RIL has appealed against this and told that it was done as a hedging strategy.

IMPACT ON SHARE PRICE

It is obvious that share price will go down due to this but it may happen that several investors will get trapped by taking short position in share. Further there is a chance of RIL getting clean chit in coming days as they have appealed against this. Traders should remain cautious in trading RIL on Monday i.e 27th March 2017 . Stock will panic before the market open and there may be a gap down opening.