The Hindu Business Line : Malwa Cotton scrip doubles; volume low

THE stock market seems to be ignoring the basic rules of equity investment. This is seen from the stock price movement of Malwa Cotton, a loss-making company for the past three years.

The stock price of Malwa Cotton has doubled since the beginning of November. The stock has gained from Rs 27.75 on November 3 to today's closing price of Rs 57 on BSE.

Of the total gains made by the stock, 72 per cent rise has been seen in the last five trading sessions.

Brokers said the rise in the stock price has been accompanied by low volume in the stock. They said the volume in the counter has been low. The higher volume recorded by the stock was only on Wednesday when 56,926 shares were traded on BSE and 1.54 lakh shares on NSE.

According to brokers, the stock has been rising due to the good outlook, demand and price has been rising, for the yarn business across the world. Malwa Cotton is engaged in the manufacture of cotton, polyester, viscose, acrylic and blended yarn.

However, analysts with a broking firm said, "even though the yarn business outlook is positive, but there is no logic for Malwa Cotton stock price to double in such a short period as the company is into loss since 2000-01."

For the financial year ended March 2001, the company had made a loss of Rs 16.1 crore on sales of Rs 383 crore. In 2001-02, the loss was Rs 17.6 crore on sales of Rs 366 crore. For 2002-03, the loss declined to Rs 3.36 crore on sales of Rs 354 crore. However, in the first half of the current fiscal the loss increased to Rs 15.36 crore on sales of Rs 172 crore.

Some brokers pointed out that the stock exchanges and SEBI should look into the sharp rise in the stock movement and also warn the small investors from buying into such stocks.

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