Mid, small caps crash; Core Edu dips 62.4%

Over a dozen mid- and small-sized stocks plunged on Monday amid speculation that the pledged shares of these companies were being unloaded.

According to sources, market regulator Sebi and the bourses have begun probing into any possible manipulation after the sell-off was witnessed in more than a dozen shares. Core Education, a constituent of the BSE Mid-Cap index, dropped a staggering 62.4 per cent to settle at Rs 110.95. ABG Shipyard (down 20 per cent), Welspun Corp (down 19.86 per cent), Opto Circuits (India) (down 10.26 per cent), DB Realty (down 9.94 per cent) and Essar Ports (off 7.45 per cent) were the other major loses from the BSE Mid-Cap index.

Rupa & Company (down 10.34 per cent), Kamat Hotels (down 8.71 per cent), Genesys International (down 8.58 per cent) and Hindustan Oil Exploration (down 7.83 per cent) were the major losers from the BSE Small-Cap index. Some of these firms have a significant amount of pledged promoter shares and there were indications about margin-calls being triggered on these counters.

Clarifying the situation, a statement from Core Education said, “We would like to clarify that none of the shares that the company has pledged with financial institutions has been sold and the company has confirmed with all the financial institutions that they continue to hold the same.”

In a stock exchange filing, Aanjaneya Lifecare said, “We find a huge fluctuation in the market prices of our scrip and it is disturbing for us. In order to achieve the growth plans of the company, we are in dialogue with our international bankers for raising resources for the expansion through FCCB. The international investors are cautious due to wide fluctuation in the market price of our scrip.”

Promoters of Indian companies often receive loans from financial institutions, pledging their shares as collateral. However, promoter pledging make these stocks vulnerable to any rumours of liquidations. There was persistent speculation of funding issues that are leading to the sell-off of pledged shares. Shares of a real estate firm fell 31.2 per cent in January on continued market speculation over its debt repayments.

“There was a deliberate attempt to pull down select small-cap stocks on Monday after spreading rumours on sale of pledged stocks. Sebi needs to plug loopholes in issues related to share pledging,” said BSE dealer Pawan Dharnidharka.

Sebi had barred 19 entities from the securities market last year after an initial probe into share price plunge in some mid-cap stocks. The Sebi decision followed a sharp plunge of 20-26 per cent in the shares of Parsvnath Developers, Pipavav Defence and Offshore Engineering, Tulip Telecom and Glodyne Technoserve on July 26.

Mid Cap carnage continues; Welspun, Aanjaneya Life, DB Realty under pressure

NEW DELHI: Select mid-cap stocks came under pressure for a second day in a row on Tuesday, a day after mid-cap stocks plunged on talks of a major sell-off by financial firms of stocks held by a leading Mumbai-based investor.

At 11:20 am, Welspun CorpBSE -8.11 % was trading 4.4 per cent lower at Rs 64.05, while Aanjaneya LifecareBSE -20.00 %, Onelife Capital AdvisorsBSE -20.00 % and Rushil Decor were locked in lower circuit, down 20 per cent.

DB Realty Ltd was trading 3 per cent lower at Rs 73.75 and GeminiBSE -18.75 % Communications Ltd was trading 20 per cent lower at Rs 3.08.

Lovable LingerieBSE -9.76 % Ltd dropped over 14 per cent to hit its new record low of Rs 220. The stock was trading at Rs 231. Religare EnterprisesBSE -5.04 % slipped over 5 per cent to Rs 279 while Jet AirwaysBSE -11.12 % dropped 4.8 per cent to Rs 480 at 11:20 am

However, some stocks such as ABG ShipyardBSE 8.42 %, Core Education bounced back in trade, up 8.9 per cent and 5.6 per cent respectively.

“For NSE Mid-Cap and Small Cap our view is that they are into their last leg of correction that may extend 3 to 4 per cent in the near term from the current levels,” said Shrikant Chouhan, Head- Technical Research, Kotak Securities.

“However, investors should be greedy to accumulate good quality stocks during the same,” he added.

On Monday, share prices of 20 stocks such as Welspun Corp and OptoBSE -4.03 % Circuit slumped by 15-32 per cent with Core Education, which is not governed by the price limit, falling by as much as 66 per cent.

“There was talk that lenders were dumping shares of certain companies held as collateral from an investor, who was unable to meet margin call pressures,” ET reported.

“Analysts attributed the fall to ‘heavy’ selling of shares by the investor as they were unable to muster funds to keep their prices propped up,” added the report. Aanjaneya Lifecare has locked in lower circuit of 20% at Rs 455 on BSE for second day in a row with no buyers on the counter after the pharmaceutical company said that the international investors are cautious due to wide fluctuation in the market price of scrip.

The company, which had got the government approval for raising up to Rs 405 crore through foreign currency convertible bonds (FCCB) issue, is in dialogue with international bankers for raising resources for the expansion.

“In order to achieve the growth plans of the Company, we are in dialogue with our International Bankers for raising resources for the expansion through FCCB. The international investors are cautious due to wide fluctuation in the market price of our scrip,” Aanjaneya Lifecare said in a regulatory filing.

Meanwhile, the promoters are continuously reducing their stake in the company during past one year. Total promoters holding has declined by 10.72 percentage points to 46.79% in December 2012 from 57.51% at the end of March 2012 quarter, the BSE data shows.

The stock opened at Rs 455 and has seen a combined 45,825 shares changing hands on the counter so far. There are pending sell orders for 340,415 shares on BSE and NSE.