The stock markets on Monday witnessed huge selling in select midcap stocks as the margin calls on large positions taken by few big operators got triggered that in turn led to panic selling in other stocks.
The stock markets on Monday witnessed huge selling in select midcap stocks as the margin calls on large positions taken by few big operators got triggered that in turn led to panic selling in other stocks.
While the benchmark Sensex gained 0.08%, the S&P BSE Midcap index and S&P BSE Small cap indices lost 1.20% and 1.36%, respectively, with 11 scrips losing between 14% and 63%.
According to analysts, 2-3 ‘big operators’ including one who had been barred by Sebi earlier had taken huge long positions in few midcap scrips and, as the stock prices declined, the brokerage houses liquidated the operators’ positions as margin calls got triggered.
The worst hit was the scrip of Core Education, which closed down 62.42%. Also the scrips of Welspun Corp, Aanjaneya Lifecare, ABG Shipyard closed nearly 20% down.
Interestingly, a central Mumbai-based broking firm run by one of the suspected investors whose positions were hit has had a ‘strong buy’ call on three of the stocks - Welspun Corp, Eros International and ABG Shipyard. Also the domestic brokerage had a ‘hold’ call on Core Education.
Market players say Sebi has already started a probe.
Some brokers believe that with promoter pledging in many of the stocks high — Core Education (47.4%), Aanjaneya (94.4%), Welspun Corp (40.5%), ABG Shipyard (64.2%) and Orbit Corp (78.7%) — selling was more pronounced as investors feared sale of pledged shares by lenders.
The recent crash comes exactly a month after the similar position unwinding and rumours of lenders selling pledged shares in few scrips on January 24 led to 2.51% crash in BSE Midcap index.
Also, Monday’s incident involved scrips like Welspun Corp and Murli Industries where the regulator had accused Sanjay Dangi of price rigging in December 2010.
Arun Kejriwal, director, Kejriwal Research and Investment Services, believes that it (midcap crash) clearly happened only in specific stocks with poor quality.
Stocks like Eros International and Opto Circuits, which had fallen 20% during the day, recovered part of the losses to close 6.28% and 12.34%, respectively.
S P Tulsian, an Independent analyst believes these scrips recovered as managements were able to convince the investors.
@nitinpshri
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