Did mutual funds get wind of the Ranbaxy deal?

MUMBAI: Mutual fund managers were very active at the Ranbaxy counter
in the run-up to the buyout of the company announced on Wednesday,
data compiled by Bloomberg shows. In the thick of action were not only
a handful of arbitrage funds, who were cashing in on the high
speculative activity in the stock, but many pure equity funds as
well.

Ranbaxy shares are up 20% over the last one month, hitting a 52-week
high on Wednesday, making it one of the best performers among index
stocks in a bearish market. Most active in the counter were five
arbitrage funds who, between them, bought a million of shares in May.
Four schemes under which the purchases were made were SBI Arbitrage
Opportunities Fund, Standard Chartered Arbitrage Fund, two funds owned
by ICICI Prudential and HDFC Arbitrage Fund.

High speculation kept Ranbaxy futures mostly at a premium to the spot
market prices during the month. By buying in the cash market and
selling in the futures, these fund managers were able to lock in a
good risk-free return. They essentially profited from the anomaly
between the cash and the futures price.

Besides, these pure-play equity diversified funds also bought shares
of the company in May. Prominent among them is DSP Merrill MF that
bought over half a million shares through four of its schemes.

Two UTI funds — UTI Opportunities and UTI Dividend Yield — added over
20,00,000 shares to their portfolio in May. Sundaram BNP Paribas and
Reliance Equity Fund also bought 1,70,000 and 1,05,000 shares in the
same period.

On BSE, the stock surged to a fresh 52-week high of Rs 593 intra-day
on Wednesday, fuelled by heavy speculative buying, before slipping
from those highs later in the day. It fell 3% on Thursday to end at Rs
543, both falls being attributed to unwinding of positions built by
informed circles in anticipation of the deal.

However, there were also a few fund houses who took advantage of the
run up in stock price to book profits. These included Reliance Pharma
Fund, Standard Chartered Enterprise Fund and several other index
funds.