A costly game

There is a very costly game that a large number of people are indulging in these days. The game involves trading in shares of companies. This popular sport has logged in an aggregate turnover (Bombay Stock Exchange + National Stock Exchange) of Rs10,70,000cr during the period April-September.

The ten most popular stocks that game participants are trading in include worthies such as Himachal Futuristic, Satyam Computer and Zee Telefilms. Together these three hog as much as 75% of the stock market's version of television rating points (TRPs).

 

HFCL steals the thunder

However, the stock that steals the thunder with 15 TRPs is the 'born again' telecom-cum-software-cum-entertainment company, HFCL. This all-rolled-in-one ICE heavyweight has recorded a trading volume of Rs148,209cr during the April-September period this year.

 

Game participants love it

At today's closing price the market capitalisation of the company is Rs12,000cr. This makes HFCL among the 10 most valuable companies in the country. Maybe a place in the Sensex beckons! Game participants (investors, traders and what have you!) eager to own a share of this ICE heavyweight have turned the company over a dozen times in the past six months (that is Rs148,209cr worth of HFCL shares have changed hands during the period as against a market capitalisation of Rs12,000cr)

But they don't want a long term relationship

HFCL is expected to report a profit in the region of over Rs250cr this year, a growth of over 150% year on year. In the ICE age it is only understandable that every market participant worth his salt wants to own a two-bit share of this company. However, data indicate nobody really wants to own this company for too long. HFCL has been bought and sold lock, stock and barrel a dozen times over. Wonder why nobody wants to hold on to this ICE maiden for very long!

So, how much does a player pay to take part in this hugely popular game where the prize appears to be not a long lasting relationship with great stocks but a one-night stand?

 

Well, any game involves some costs

In this case, it is the brokerage that the game participants incur while buying and selling shares of a company. Let's assume that the participants in this game pay a brokerage of 0.1% every time they trade (and that is a pretty realistic estimate of brokerage rates prevailing in the country!). That throws up a figure of Rs148cr!

It takes two to tango

Now remember that in this game there has to be a seller and a buyer. It takes two to tango after all. Hence, the total fees paid by buyers and sellers in this game amounts to Rs296cr. And this is the cost of the game for six months. If this blockbuster continues to play all over gaming rooms in the country for another six months the game participants would have shelled out a rich sum of Rs600cr!

All of this in an effort to take control of a company that will generate a net profit of just Rs250cr this year! Do they know something we don't or have they forgotten to do the arithmetic?