285% Dividend Payout: Alert Traders! NSE Adjusts F&O Contracts In NMDC For August Expiry Ahead Of Ex-Dividend

PSU stock NMDC, formerly National Mineral Development Corporation, is set to trade ex-dividend on August 31 for its dividend payout of Rs 285%. However, because of this, NSE has made adjustments in the futures and contracts in the security NMDC. All F&O positions in NMDC will be carried out on August 30, a day before the record date. NSE also said that open positions shall be carried forward at the daily settlement price less Rs 2.85, which is the dividend amount, for respective F&Os in the security.

In its circular, NSE said, "Adjustment of futures contracts available in NMDC shall be carried out based on the reference rate of the relevant futures contracts on August 30, 2023 (last cum-dividend date). The reference rate to be reckoned for adjustment shall be the daily mark to the market settlement price of the relevant futures contract, which shall be reduced by the dividend amount."

Accordingly, all positions in futures contracts with the underlying security as NMDC would be marked-to-market on the last cum-dividend date i.e., August 30, 2023, based on the daily settlement price of the respective futures contract. After such processing, open positions shall be carried forward at the daily settlement price less Rs 2.85 (dividend amount) for the respective futures contract.

Further, the exchange said that from August 31, 2023 (ex-dividend date), daily mark-to-market settlement of futures contracts with the underlying security as NMDC would continue as per normal procedures.

Also, begin-of-day margins on August 31, 2023, would be computed for the futures contract with underlying as NMDC based on the adjusted carry forward value. It added, "Subsequently, intra-day margins would be computed based on the relevant traded prices at the time the intra-day span risk parameter files are generated."

Here is an example of how your F&O positions in NMDC will change due to the dividend payout by NSE:

For example, a trader's long position in NMDC let's say at 4500 at price of Rs 130 (before the adjustment of Rs 2.85 dividend), then the long value would be Rs 5,85,000. However, post the adjustment of the Rs 2.85 dividend, the value price dips to Rs 127.15 (Rs 130.00 - Rs. 2.85 which is the dividend amount), and hence the long value would decline to Rs 5,72,175 on the long position of 4500 contracts.

In the case of the options contract, NSE said the full value of the dividend i.e., Rs 2.85 would be deducted from all the cum-dividend strike prices on the ex-dividend date and adjusted to the nearest tick size to arrive at the new strike price. All positions in existing strike prices shall continue to exist in the corresponding new adjusted strike prices.

On Thursday, NMDC's futures declined by 1.18% to Rs 121.10 for August expiry, compared to the previous close of Rs 122.55.

While options contracts were also in the red. The strike (call) in NMDC securities ranged from Rs 100 to Rs 135 today, while put strike ranged from Rs 104 to Rs 125.

Meanwhile, the share price of NMDC on NSE traded at Rs 121.05 apiece down by 1.06%.

NMDC declared a final dividend of Rs 2.85 per share or 285% for FY23, for which it has set August 31 as the record date to determine eligible shareholders for the payout. The stock will turn ex-dividend on August 31 as well. For the same fiscal, the company has already paid a dividend of Rs 3.75 per share or 375% aggregating to Rs 1,098.98 crore.

In total, NMDC announced a total dividend of Rs 6.6 per share (660%) for the financial 2022-23.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, znor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.