After RCom, fear of financial default spreads to other stocks

Our Bureau Chennai | Updated on February 05, 2019

Suzlon, CG Power, IRB Infra plummet on panic selling

The bear grip that mauled Anil Ambani Group stocks on Tuesday spread to other stocks such as Suzlon Energy, CG Power and Industrial Solutions, JP Associates, and IRB Infrastructure Developers.

According to market participants, fear of financial default and margin call triggered a panic selling in these shares.

While Suzlon slumped 42 per cent intraday, CG Power crashed 17 per cent, JP Associates tumbled by 15 per cent and IRB Infra by 13.8 per cent.

Anil Ambani Group stocks such as Reliance Communications, Reliance Power, Reliance Infrastructure and Reliance Capital continued their slide for the second day as investors preferred to exit. RCom on Monday said it would be filing for bankruptcy to seek fast-track resolution following its failure to sell its assets to repay lenders. This has triggered a collapse in the Group stocks.

RCom crashed to ₹5.55 from ₹10.45 in just two days; RPower to ₹12 from ₹17.6. However, both managed to close slightly better on Tuesday. Reliance Capital, which crashed to ₹142 from ₹180, managed to close in the positive territory at ₹152.20; similarly, RInfra which slumped to ₹220.45 from ₹257 levels, closed at ₹227.25.

Amidst the ruins, Reliance Nippon Life Asset Management remained strong. The stock, climbed 6.7 per cent to ₹136.9.

Suzlon clarifies

Market rumours had it that shares of the promoters that were pledged with financial institutions have been offloaded heavily by them.

However, most of these stocks recovered slightly after Suzlon came out with a clarification. In a response to certain media queries it clarified “none of the shares of the promoters held in the company have been invoked”.

“Further, the promoters’ shareholding in the company has been pledged for collaterally securing the obligations of the lenders of the company and not towards securing promoters’ personal borrowings. And the said pledge too is not mark-to-market.”

The rumours about the company are baseless and “we appeal to all investors and stakeholders not to believe the same,” it said. Besides, it further said the company is regular in servicing its debt obligations, including servicing obligations towards banks and others for the month of January 2019.

According to Ramesh Chordia, independent Chennai-based analyst, it is better to stay away from these companies, even as they fell up to 50 per cent in the last two days.

“Value-buying or cost-averaging concepts will not work in these cases,” he warned.

Published on February 05, 2019

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