From Announcement to Action: The Impact of Capex News on Stock Prices
In the stock market, reacting to news is a well-known tactic. Investors often trade or make swing and long-term positions based on announcements, aiming to capitalize on sharp price movements. But how impactful can a single piece of news be?
This case study focuses on a striking example of how a capital expenditure (capex) announcement transformed market sentiment within hours.
The Company in Focus: Deepak Nitrite
Deepak Nitrite is one of India’s fastest-growing and most trusted names in chemical intermediates. Known for its consistent performance and strategic expansions, the company has built a solid reputation in the industry and the stock market alike.
The Big Day: May 24, 2024
On this day, Deepak Nitrite issued a notification that sent ripples through the market. Investors responded with overwhelming enthusiasm, pushing the stock price up by an impressive 10% by the day’s close.
What Did the Notification Say?
Here’s a snippet from the announcement: [src]
Sub: Intimation under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
Pursuant to the requirement of Regutation 30 of SEBI (Listing Obtigations and Disclosure Requirements) Regulations, 2015, this is to inform you that the Company’s wholly owned subsidiary, Deepak Chem Tech Limited (formerly known as Deepak Clean Tech Limited) has signed a Memorandum of Understanding with Government of Gujarat on 23rd May, 2023 with an intent to invest around ₹5,000 Crores in next 4 years for setting up projects to manufacture Speciality Chemicals, Phenol / Acetone and Bisphenol at Dahej / Nandesari, in the State of Gujarat.
The proposed investment is expected to generate around 1,500 direct and indirect employment opportunities.
The proposed investment will also help reduce India’s import bill. Products out of these projects have varied end use such as:
- Speciality Chemicals cater to the demand of Agro Chemicals and Pharma industries.
- Phenol and Acetone are used in varied end-user segments like laminates, plywood, pharma, paint, adhesives etc.
- Bisphenol caters to Epoxy and Adhesives and is the most important feedstock towards Polycarbonate which has various applications across Automotive, Electronic and Consumer Goods, Defense, Medical Equipment etc.
Please take the same on your record.
Timeline of Deepak Nitrite’s Stock Movement
🕒 09:15:00 — Market Opens
- Opening Price: ₹1948 per share.
The market starts its day quietly, with no signs of the storm brewing ahead.
🕒 10:25:57 — News Hits the BSE
- Price at Announcement: ₹1944.95 per share.
This will serve as our reference point to measure the stock’s upside potential.
🕒 10:29:56 — NSE Publishes the News
- Price: ₹1956.15 per share (+0.575% in 4 minutes).
- Volume Spike: From 200–300 per minute to 6,000–7,000 per minute.
The sudden activity likely signals the presence of automated trading bots, responding faster than human traders could.
🕒 10:31:00 — Reuters on TradingView
- Price: ₹1955 per share (+0.5%).
- Volume: Continues at heightened levels.
Despite the news spreading further, the price sees little movement, consolidating gains.
🕒 11:55:04 — Major Public Coverage (Business Standard)
- Price: ₹2125 per share (+9.25% from the reference price).
- Volume: Peaks in six-digit figures per minute.
For nearly 1.5 hours, the stock showed a linear price increase, offering a golden window for attentive traders to capitalize. By this point, most of the upside had already been captured.
🕒 15:30:00 — Market Closes
- Closing Price: ₹2130.05 per share.
- Final Upside: Minimal movement since the Business Standard article.
Key Takeaway: Timing is Everything
By the time news reaches the mainstream media, it’s often too late for the average investor. In this case, the majority of returns were realized within 1.5 hours of the initial announcement. This underscores the advantage of being well-informed and having the tools to act swiftly.
Further timeline
🕒 11:34:24 (May 25) — Exchange Seeks Clarification
The Exchange has sought clarification from Deepak Nitrite Ltd on May 25, 2023, with reference to Movement in Volume.
🕒 12:47:09 (May 25) — Standard Response
Further, there is no information / announcement (including pending announcement) which in our opinion may have bearing on the Price / Volume behavior in the scrip and which is required to be informed to Stock Exchanges in terms of Regulation 30 of SEBI (LODR) Regulations, 2015.
To wrap things up, there’s a similar and even more fascinating story in the book Business Adventures: Twelve Classic Tales from the World of Wall Street. In the chapter “A Reasonable Amount of Time”, it talks about how insiders at Texas Gulf Sulphur tried to cash in on secret information before the news went public. It’s a gripping tale that ended up changing how insider trading is dealt with today. If you found this case interesting, that one’s definitely worth checking out!
Feel free to share your thoughts or insights in the comments!
