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A 62 per cent plunge in the Core Education & Technologies scrip led to a collapse of mid- and small-cap stocks on the bourses on Monday. A massive sell-off in shares of over a dozen companies, including Core Education, was triggered following reports around noon that financial institutions were selling pledged shares.
This is not the first time mid- and small-cap stocks are facing traders’ wrath. Last August, several stocks, including Tulip Telecom, plunged on similar news. Earlier in January, HDIL led the decline.
The Nifty midcap-50 on Monday declined 1.18 per cent to close at 2,120 and the BSE mid-cap index lost 1.2 per cent to close at 6,530. As many as 132 stocks fell between 5 and 10 per cent on the BSE and another 26 in excess of 10 per cent.
“Leveraged positions of dominant market participants saw unwinding where most of it happened unwillingly. This led to a sharp fall in prices and created pressure leading to further unwinding of similar positions in multiple brokerages,” said Arun Kejriwal, Founder, KRIS Research.
Opening at Rs 286.55 on the NSE, Core Education hit an intra-day low of Rs 98.6 before closing at Rs 110.50. Over 1.96 crore shares changed hands on the NSE, of which 16.72 per cent would be delivered (over 32.86 lakh shares).
Cresta Fund offloaded 13.75 lakh shares at Rs 113.71 each while Genuine Stock Brokers bought 7.27 lakh shares at Rs 114.77 on the NSE in bulk deals. Nikhil Morsawala, Director, Finance, Core Education & Technologies, said: “We have spoken to all institutions and confirmed that none of them has sold any of our shares pledged with them. Once we get market data from the exchanges, by tomorrow afternoon, we will be able to ascertain the cause of the price movement.”
“We had pledged equity only as collateral to financial institutions such as IFCI and banks and the main security is our future cash flow. We had raised term loans totalling Rs 1,400 crore of two-, three- and five-year tenor against cash flows that would accrue on execution of State government contracts.”
“There were no demands by financial institutions to create further pledge even after the share price went down,” he added.
The promoter holding in Core is 46.45 per cent of which 22.02 per cent is pledged to financial institutions.
According to sources, SEBI and exchange officials are looking into the slide.
Vijay Kedia, Director, Kedia Securities, said: “Absence of retail investors in Indian capital market is because majority of mid-caps are manipulated and operators are never caught”.
>raghavendrarao.k@thehindu.co.in
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