Shares of Steel Authority of India Ltd (SAIL) jumped up to 4% to hit a high of Rs 210 on the BSE on Thursday, extending their rally for a second straight session and gaining 19% over the period.Analysts attributed the sharp rally in Steel Authority of India largely to a short squeeze triggered by heavily crowded bearish positions in the derivatives market. In the previous session, the stock witnessed unusually high trading activity as traders rushed to cover short positions amid rising prices and mounting margin pressure.According to Apurva Sheth, the SAIL counter had already been under close watch as it was nearing its Market Wide Position Limit (MWPL), a key derivatives indicator that tracks the maximum exposure allowed in a stock.Sheth said a sharp increase in MWPL utilisation usually points to crowded futures and options positioning. In SAIL’s case, derivative exposure had become highly concentrated among a limited group of traders.Analysts noted that such concentrated bearish bets can quickly become vulnerable when prices begin moving higher. As SAIL rallied sharply, short sellers were likely forced to unwind positions after stop losses and margin calls were triggered, adding further buying pressure to the stock.Market experts said the move reflected a classic short squeeze. Traders initially build aggressive short futures positions expecting prices to decline, causing MWPL utilisation to rise as more participants enter the same bearish trade. However, when the stock unexpectedly moves upward, leveraged traders are compelled to rapidly buy back shares and futures contracts to limit losses and meet margin requirements.Also read: Adani Enterprises shares jump 5% after nearly 60 lakh shares worth Rs 1,435 crore change hands in block dealThis forced buying creates a self-reinforcing cycle that drives prices even higher in a short span. Sheth said the key takeaway from the rally was not just the magnitude of the move, but the fact that it intensified because too many traders were positioned on the bearish side at the same time.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
SAIL shares rise 19% in just two sessions. What’s triggering this sharp surge?
SAIL shares surged 19% in two sessions as a heavy build-up of bearish derivative positions triggered a sharp short squeeze. Rising prices forced traders to unwind concentrated short bets amid margin pressure and stop-loss hits, creating a cycle of accelerated buying and pushing the stock sharply higher.
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