What does everyone think about the spread between Asian Paints and Elcid Invesmnets?
As of today, Elcid Investments has a lower circuit and is trading at around 2.69L. What if someone is to buy Elcid shares and short equal amount of futures of Asian Paints?
The price of Elcid to Asian price comes out to around 140. The logic being, Elcid has total 28313840 shares of Asian, if we assume that as the only asset(which is not true), dividing that by the total number of subscribed shares of Elcid, ie 2L, then 1 share of Elcid should be 141.4693 times of Asian. According to today’s price, that is 30% upside.
If we buy 10 shares of Elcid, that comes out to approx 1400 shares of Asian, therefore 7 Futures lots.
With and investment of around 27L, there is a spread of 8L, over whatever time it takes to capture the spread.
Any thouughts