High-frequency trading firms have a field day with Reliance Power shares

High-frequency trading firms – or algo firms in market lingo – use complex algorithms and powerful computers to execute trades at lightning speeds and pocket a gain in milliseconds at times

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Reliance Power shares gained over 5 percent for a second day in a row on August 30. Going by the bulk deals data on August 29, it is likely that high-frequency trading (HFT) firms had a gala time with the stock today too.

The stock closed at Rs 20.45 on the NSE, over 12 percent higher from the previous close.

High-frequency trading firms – or algo firms in market lingo – use complex algorithms and powerful computers to execute trades at lightning speeds and pocket a gain in milliseconds at times.

Take a look at this: Citadel Securities India Market Pvt Ltd bought 22.18 million shares of Reliance Power on August 29 at Rs 18.22 and on the same day sold 8.47 million at Rs 18.30. Essentially, it made a gain of 8 paise per share sold, taking the cumulative gain to Rs 6.7 lakh.

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Similarly, another HFT Hriti Pvt Ltd sold 23 million shares at Rs 18.19 per share, which it had purchased at Rs 17.58 on August 25.

While the quantum might look small, HFTs carry out such trades in several stocks. For instance, Citadel Securities was active in Railtel Corp on August 28, Vishwaraj Sugar Industries on August 24 and Coffee Day Enterprises on August 17.

Similarly, Hriti was active in Hindustan Construction Company, Indiabulls Real Estate, Indiabulls Housing Finance and Reliance Power, all on the same day.

Also Read: Rise of the machines: HFTs tighten grip, make a killing on the Street as F&O volumes explode

HFT algos try to predict price moves by identifying patterns in historical data, and in some cases, even analysing news articles and social media posts.

In the case of Anil Ambani-led Reliance Power, a report by Economic Times said that the company along with Reliance Infrastructure was raising Rs 1,043 crore from Reliance Commercial Finance, a wholly owned subsidiary of Authum Investment & Infrastructure, by allotting preferential shares.

Moneycontrol could not independently verify the report.

For the quarter ended June, Reliance Power’s net loss widened to Rs 296.31 crore on the back of lower income and higher expenses. It had clocked a net loss of Rs 160.79 crore during the year-ago quarter.

Its total income declined to Rs 1,958.72 crore in the first quarter of the current fiscal from Rs 2,144.97 crore in the year-ago period.