YES Bank out of NSE indices this week

The National Stock Exchange (NSE) has decided to advance YES Bank’s exclusion from NSE indices to this Thursday, in light of the recent reconstruction scheme for the private lender. There are also certain restrictions on trading its shares. On Monday, YES Bank’s shares saw a spike, closing 45.2 per cent higher.

Lack of supply post lockin and short-covering led to the rally. “As much as 75 per cent of equity is locked-in, so there is less supply of shares. Around 600 million shares are available in the market; futures were trading at discount. We saw some short covering as settlement of future contract would happen in May,” said Yogesh Radke, head of alternative and quantitative research at Edelweiss Securities.

According to market participants, the open interest in derivative market was for 25 crore shares.

Further, market participants say excluding the stock earlier than the slated date will help to prevent fresh flows from the Nifty and Nifty Bank-linked mutual funds. Earlier, the exclusion was to be effective from March 27.

The government in a notification on Friday said the existing shareholders (on date of scheme commencement) or allottees under the scheme will not be able to sell more than 25 per cent of holdings in YES Bank for a period of three years.

The 75 per cent three-year lock-in on YES Bank has prompted MFS to seek direction from the Securities and Exchange Board of India (Sebi), as exclusion of YES Bank from indices will force them to exit the YES Bank.

However, the lock-in will prevent selling the shares. As many as 50 index- and exchange-traded funds (ETFS) are exposed to YES Bank as of February 29.