Volatility in stock markets is part of everyday business. There are many cases of stocks reaching their all-time highs and lows in the midst of such volatility. Such extreme volatility can also drain the investor’s wealth and can lead to trading in overdrive. Small or retail investors often get the tail-end in such situations. The stock exchanges and SEBI has put many safeguards for the investors and traders in such situations to ensure that they are not affected by extreme volatility. Upper and lower circuits are part of such safeguards. When a company’s shares hit the upper or lower circuit it means they have crossed the minimum and maximum level of price difference set for them.
Quite recently Delta Corp had hit the upper circuit due to price volatility. Given below is the meaning of the upper circuit and related implications.
What is an upper circuit?
An upper circuit is the higher end of the price band that is set for individual stocks. These limits fluctuate on a daily basis based on the latest traded prices of the stock in the previous session. The upper limit of the circuit is usually up to 20% of the price fluctuation. When a stock hits the upper circuit, the trading for such stock is frozen for a while and is re-initiated after a cooling period. The prices of the stock after the circuit is hit are determined based on the demand-supply functions in the pre-open auction session.
Delta Corp and its highlights
Delta Corp is a listed company in India that is engaged in the casino gaming industry making it the only listed company in the country in such business. The company has its presence in the fast booming online gaming business through its online poker site ‘Adda52’ as well as hospitality in Goa and Daman.
The company has also started its first international casino in Nepal at Hotel Kathmandu Marriott in February 2020. The company has more than 2,50,000 shareholders and net revenue of over Rs. 800 crores in FY 2020. The company is famous for its offshore casinos under its flagship name ‘Deltin’ operating in Goa. the big Bull of India, Mr. Rakesh Jhunjhunwala owns approximately 7.5% stake in Delta Corp.
When did Delta Corp reach the upper circuit?
Quite recently Delta Corp had posted its quarterly financial results for the quarter ended September 2021. The company posted a net loss to the tune of Rs. 22 crores approximately against the loss of Rs. 55 crores approximately in the previous quarter. Also, with the easing of lockdowns and business is mostly back to usual, the gaming industry has seen a huge surge. During the lockdown too, the online gaming portal of the company ‘adda52’ has seen tremendous growth. All these factors have led to favorable market sentiment for the company and the stock prices have soared.
The stock prices of Delta Corp hit the upper circuit in March 2020 when the Board was considering a buyback. The stock hit the upper circuit when the stock prices rose beyond 5%. The company’s stock further upper circuit in October 2021 when the share prices soared 13% approximately. The push to the stock prices going too high was the combination of good financial results, the easing of the lockdown, and the coming festive season.
When a company’s shares hit the upper circuit, the trading and investment in such shares are frozen by the stock exchange for a while. This cooling period is decided by the stock exchange and the prices are then decided in the pre-open auction session. If the demand for the stock is high, the prices will rise and if the demand for the stock falls, the prices will also crash.
Delta Corp was the only company listed on a stock exchange from the gaming sector until Nazara Technologies. A company usually hitting the upper circuit is perceived to have a brighter future based on the market sentiments. The driving force for such market sentiment can be strong financials, a unique product of the company, conducive market, and political environment among others.
Circuit breakers are the system set up by the stock exchanges to safeguard the investors and traders from extreme price volatility. It is triggered when the prices of any stock hit the lower or the upper margin set for such stock or indices as the case may be.
When the circuit breaker is activated, it allows investors and traders to react to the price volatility without any poaching and in a rational manner.
Delta Corp has 6 offshore casino licenses as well as a land casino license. Of these offshore licenses, the company operates 3 offshore casinos in Goa.
Delta Corp has acquired the online gaming portal ‘Adda52.com’ which is a portal for online games of poker. It currently has the top slot for the online poker business. Apart from this, ‘Adda52rummy.com’ is a portal for online games of rummy giving the company a strong presence in the online gaming business.
The current price(Jan 2022) for shares of Delta Corp is Rs. 260 per share