Thread by @KAnantrao

When the stock we bought on breakout doesn't move an inch? Behind the scenes insights for the Retail Investor

Many time it happens that we buy a stock in the morning after getting a buy signal on the end of day charts overnight. We do so at the opening trade and are then witness

painful price action when we see the stock oscillating between -1% to +1% from its previous day close throughout the day and sometimes the same continues for even 5-10 trading sessions. We wonder, who is the enemy of our breakout & how he is managing to peg the stock in range

This especially happens in Nifty 100 stocks i.e large caps.
So what happens behind the scenes ?
A large DII who has 200 odd brokers empanelled decides to off load say 100L shares (it may be owning 21% of the company) in the market. Assume the market price of the stock is Rs.300

Rs.300 x 100L shares makes the value of the transaction around worth 300 cr. plus minus the slippage. Assume the average 10 day volume is 25L per day and impact cost is not high. How does the DII offload the 100L share with minimal impact on prices? One way is to find buyer and

cross a block trade? Its completely removes the price impact but the buyer may ask for a x% discount or so from CMP and there are reporting related issues to be considered if more than specified quantity is bought/sold in one tranche and/or 1 day.
The long route is distribution.

So the DII gives sell order to 10 brokers empanelled in following order(assumed)
B=Broker Qty=1L/broker Limit=Lt
B1: Lt 300.00
B2: Lt 300.50
B3: Lt 301.25
B4: Lt 302.00
B5: Lt 302.75
B6: Lt 303.25
B7: Lt 303.50
B8: Lt 303.45
B9: Lt 303.65
B10: Lt 303.85
Avg Price:302.42
VWAP: 302

Assuming entire quantity is sold then 10% of 100L shares have been sold at noon without impact the price adversely.
Next around 2PM DII gives an order sell 15L shares to next 15 brokers in the same manner as given above but this time the concentration is higher near avg. price

At 3PM assume a total of 22L shares have gotten sold at avg price of 303.15 with day long VWAP being at 303.15.
Then the DII will give an order to sell 1.5L shares/broker to next set of 20 brokers total 30L shares to be sold. However this time DII will keep the spread at Rs.0.05

instead of Rs.0.25 in the morning and noon. Also he would revise the limits of brokers whose orders are pending instructing them to be aggressive with volumes if the given price is seen on terminal. By the end of the day DII would be offloaded around 60L shares @ avg price 302.50

with market VWAP for the day being at 302.25. Next day he would repeat the process till his intended quantity is not completed ensuring minimal price damage.
This strategy has stood the test of time for DII & it is able to offload their stock in spite of modern methods available

The DII also knows that many brokers flout the norms by leaking their trades during market hours to other clients and sometimes after careful consideration, DII stops or reduces the business with such brokers for a fortnight or a month. Who wants to lose staple business after all

Knowing well that their selling is known, the DII uses this in its favor sometimes by stopping the trade for a week and then resuming back to selling.Such old school methods are used to remain under the radar while ensuring the mandate is met with minimal price disruption.

They also seek opinion from various TA's from different brokerages who armed with dealing room input sometimes will give a bearish view to the DII and only a select set of TA's would be courageous to tell the DII their actual reading on the stock without fear/prejudice.

The Brokers whose TA who gave the actual reading without fear/prejudice will be rewarded with a slight increase in the business whereas those who tried to please the DII will see the business coming down slightly. This is behind the scene action which sometimes coincides with our

stock where we are bullish but a DII is offloading 100L shares and stock prices get struck in a range for days, testing our patience and questioning the validity of our breakout.
The names of people/organisation will always remain confidential and please dont expect us to reveal

Hope you all liked the story and learning would help you understand your charts better leading to improved returns for your trades.
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