Stock exchanges ban fresh F&O positions in Kalyan Jewellers | Stock Market News

India’s stock exchanges have banned fresh trading of Kalyan Jewellers Ltd’s stock futures and options contracts in the derivatives segment after trader outstanding positions in the counters came close to the threshold or limit for such positions. 

This follows the market capitalisation of the country’s second-largest jewellery maker falling by a third since the start of this year.

The ban on Thursday came less than 48 hours after Kalyan Jewellers’ management tried to assuage investor concerns about the company’s share price crash. Despite the management’s assurances that it was business as usual, Kalyan Jewellers shares fell 6.9% on Wednesday and another 2.9% on Thursday.

The F&O ban is implemented by exchanges based on rules framed in consultation with the Securities and Exchange Board of India.

Kalyan Jewellers’ share price has fallen 32% from a record high of ₹795.4 on 2 January to ₹539 on Thursday, when the company’s market cap was at ₹55,486 crore.

On Wednesday, the stock futures and option contracts’ open interest (OI)—outstanding buy-sell positions—hit 72.7 million shares, or 95% of the so-called marketwide position limit of 76.5 million shares set by NSE and BSE.

Traders squared off some of their positions in Kalyan Jewellers on Thursday, with the aggregate derivatives OI dropping to 89.14% (about 68 million shares). OI refers to outstanding buy-sell derivatives positions.

For the stock to exit the ban, the position limit has to fall to 80% of the marketwide position limit or threshold, said a broker, requesting anonymity. This implies that existing positions—buy or sell—can only be squared off.

Kalyan Jewellers’ promoter Ramesh Kalyanraman, chief executive officer Sanjay Raghuraman and senior management dismissed rumours of impropriety during an analyst call on Tuesday.

During the nearly hour-long interaction, worried investors and analysts quizzed the management on shares pledged by the promoters, if any tax raids had been conducted, and if the promoters had bought private planes. One investor even asked if the management was aware of any bribes paid to an unnamed fund manager to buy shares of Kalyan Jewellers.

The management vehemently denied all the rumours.

Faith in the stock

Five analysts have a ‘buy’ recommendation on the Kalyan Jewellers stock and three have an ‘add’ rating, while one has a ‘sell’ rating. Seven analysts have a 12-month consensus share price target of ₹763.14 for the Kalyan Jewellers stock, per Bloomberg.

The sole ‘sell’ rating was by Ventura Securities, given on 12 December, with a target price of ₹692 per share.

Motilal Oswal Securities issued a ‘buy’ rating on Kalyan Jewellers with a revised price target of ₹875 per share on 7 January, when the stock ended the day’s trading at ₹722.95. The brokerage has been maintaining a ‘buy’ rating on the stock since 19 June, when it had a target price of ₹525 per share. It raised the price target successively to ₹800 per share on 4 December.

Citi has retained its ‘buy’ rating and target price of ₹810 on Kalyan Jewellers on 7 January. ICICI Securities retained its ‘add’ rating on the stock but raised the price target to ₹770 on 8 January from ₹740 on 14 November, when the share price had declined to ₹706.4 apiece.

The Thrissur, Kerala-headquartered Kalyan Jewellers is India’s second-largest listed jewellery maker, behind Titan Ltd, which sells jewellery, watches and wearables and has an eyecare business.

Kalyan Jewellers, which was started in 1993, has 303 stores, including 36 in West Asia. Titan, a joint venture between Tamil Nadu Industrial Development Corp. and the Tata Group, was started in 1984 and has 1,009 jewellery stores.

Kalyan ended the September quarter with ₹6,065.5 crore in revenue, while Titan’s jewelry business totaled ₹10,736 crore in revenue.