Rakesh Jhunjhunwalas purchase of ZEEL shares; Too well-timed to be true!

Talking about Rakesh Jhunjhunwala and abnormal returns in the stock markets; he is consistently able to beat the markets. A lot of investors respect and follow him for that. 

As the media all over India is praising ace investor Rakesh Jhunjhunwala for his timely investments in ZEEL where he purchased five million equity shares at Rs 220.44 per share on September 14, 2021, worth Rs 110 crore, the distant doubt that comes immediately to anybody’s mind is if he was aware of the Sony -ZEEL merger. On the same day of his investment in Zeel shares, BoFA securities Europe SA purchased 4.86 million shares for Rs 236.2 apiece. 

Rakesh Jhunjhunwala is sitting on a cool 50 per cent plus gains in just 7 trading sessions. In a zero-sum game, gains made by some lead to lost opportunities for others, especially retail investors. As ZEEL is an F&O scrip, it has got no circuit limit and hence a steep climb in the share price has delivered abnormal returns in quick time to the ace investor often dubbed as Warren Buffet of India. 

Talking about Rakesh Jhunjhunwala and abnormal returns in the stock markets; he is consistently able to beat the markets. A lot of investors respect and follow him for that. 

However, eyebrows are being raised with the recent ZEEL purchase, as it sounds too fortuitous to be true that Rs 110 crore is invested via a block deal and within seven trading days the company announces a merger deal with a global media giant - Sony. Was it a calculative bet of Rs 110 crore or was it a well-informed decision? If it was a well-informed decision discounting the merger deal to happen to lead to a bet of nearly Rs 110 crore, SEBI needs to take note of this. Was he privy to the information on the merger deal and the positive news associated with the company that was going to be announced soon? We don’t know. However, if Rakesh Jhunjhunwala had withholding information publicly not available and he acted upon it, thus profiting from it – the regulators need to check it out in the interest of market fairness. 

Rakesh Jhunjhunwala in the past has been accused of insider trading. Only recently in July 2021 did SEBI settle a case with him under the consent route relating to Aptech, where the ace investor has management control. According to SEBI, Jhunjhunwala and others traded in Aptech shares when in possession of unpublished price sensitive information (UPSI). According to reports Rakesh Jhunjhunwala has paid Rs 18.5 crore of which the disgorgement amount is nearly Rs 6 crore. 

SEBI recently has put in several stricter measures to improve the health of the markets and to boost the investors 'confidence. One of the major tasks of SEBI is to ensure that there is no market manipulation. 

Big media houses continue to remind everyone how smart the ace investor is and explains in detail how Rakesh Jhunjhunwala made a killing in just one week. But for the sake of healthy market practices and to protect investors from market manipulation, a SEBI probe is a must in the recent purchase. 

Will SEBI alleviate the doubt raised by doing its investigation. Only time will tell.