Infra stocks plunge as borrowing costs rise

Our Bureau Mumbai | Updated on November 13, 2017



Concerns regarding slowdown in project execution and rising borrowing costs pushed stocks of many infrastructure companies to their yearly lows on Wednesday.

Reliance Infrastructure plummeted close to 19 per cent on Wednesday to its 52-week low. It was the biggest loser among the Sensex scrips on Wednesday. Jaiprakash Associates dropped 10.68 per cent to its 52-week low. It was one of the worst-hit scrips. Larsen and Toubro shed 1.25 per cent.

Mr Sameer Kamdar, Chief Executive Officer, ASK Investment Managers, said that investors should avoid infrastructure stocks as there is a visible slowdown in projects announced by the Government.

A broker who did not wish to be named said that high input costs and fears of rising borrowing costs have also led to these shares being hammered.

Punj Lloyd dropped 12 per cent touching its 52-week low on Wednesday. The other infrastructure stocks that recorded their yearly lows on Wednesday were Lanco Infratech (down 14.42 per cent), IVRCL (12 per cent), GMR Infrastructure (11.6 per cent), Gammon India (10 per cent) and GVK Power and Infrastructure (9.27 per cent).

A stock dealer with a brokerage said that a lot of these infrastructure companies have pledged substantial portions of their shares with brokerages.

“Many of these companies have pledged more than 50 per cent of their shares with broking houses. And once margin triggers happen these companies will not have enough liquidity, which will lead to their share prices falling. Margin pressures have also led to the share prices of these infrastructure companies falling,” he explained.

Published on February 09, 2011

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