I read an article in The Hindu Business line - Derivative Entrants notch up quick gains
The article tells that as National Stock Exchange (NSE), India, announces the stocks to be introduced to derivatives trading through a circular, most of the companies' stocks appreciated till the time the actual derivative trading starts.
During the last one year about 50% of the companies who filed for derivative trading returned more than 9% during the time window between the announced and the actual trading. Moreover, only 6 out of 71 companies gave negative returns.
My question is - whether NSE has any policy in place which could prevent a company from entering the derivative trading when its stock is taking a beating? Companies can exploit this finding to their advantage when their stock is going down.
Thursday, September 20, 2007
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