Solrex Pharmaceuticals, believed to be a Ranbaxy Laboratories-promoted company, has reportedly increased its stake in Chennai-based drug major Orchid Chemicals and Pharmaceuticals to 14.72 per cent — just short of the 15 per cent mark that will trigger an open offer to acquire the cephalosporin drug major.
A TV channel reported today that Solrex has increased its stake in Orchid to 14.72 per cent in bulk share purchase deals on Friday. The channel also said other Ranbaxy promoter group companies might have also garnered shares in Orchid.
According to the National Stock Exchange (NSE) data available yesterday, Solrex had 12.84 per cent stake in Orchid, all acquired in different deals after March this year.
The development could not be confirmed with the stock exchanges and Orchid. An official spokesperson of Orchid said he was yet to get details of the share purchase data of Orchid. Ranbaxy officials declined to comment on the developments.
A few days ago, Malvinder Mohan Singh, the managing director and chief executive officer of Ranbaxy, had stated that the company was against any hostile takeovers.
Orchid maintained that Solrex was understood to be an investment unit of Ranbaxy and the share purchases by Solrex were value picking rather than a takeover attempt.
Orchid’s Chairman and Managing Director K Raghavendra Rao has only 15.9 per cent stake in Orchid. In case of an open offer, one option before him is to utilise the warrants worth about Rs 50 lakh, which can be converted into a 7 per cent stake. This would increase Rao’s stake close to 23 per cent, said sources.
Reportedly, the Orchid management is in talks with financial institutions to convert the warrants and to rope in strategic investors to thwart the takeover attempts.
“We are observing the developments, but have not taken any decision on conversion of the warrants,” said the company spokesperson. Both Raghavendra Rao and Deputy Managing Director C B Rao are still away in Japan, as a part of the opening of a subsidiary of Orchid in Japan.
Life Insurance Corporation of India and United India Insurance Company hold 7.8 per cent and 2.48 per cent, respectively in Orchid.
Other large institutional investors in the company include Gazal Industrial Holdings (8.48 per cent), Macquarie Bank (5.13 per cent), Harpline (4.54 per cent) and Fidelity Trustee Company (2.66 per cent).
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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