Hind Industries, a small-cap company, saw its market capitalisation get decimated by Rs1.72 crore over a single trade of a single share on Wednesday! This is a result of SEBI’s newly-introduced call auction system of tackling illiquid counter
On Wednesday, Rs1.72 crore of market capitalisation was wiped off, in a single trade of just one share, in Bombay Stock Exchange (BSE) listed scrip—Hind Industries, points out investor Bosco Menezes. This trade took place in the much-touted and controversial Periodic Call Auction System (PCAS) window, introduced by Securities Exchange Board of India (SEBI), where illiquid scrips are traded. This clearly means that PCAS system is extremely susceptible to manipulation—exactly what the SEBI tried to counter through PCAS!
Here is what happened yesterday.
In the BSE’s PCAS window, just one share was traded at Rs 38.10, which is apparently the lower circuit filter and the first trade since 29 May 2013. Its previous close was Rs40.10 (i.e. 29th May). This means, roughly Rs1.72 crore of market capitalisation of Hind Industries was destroyed with a single trade. In fact, this isn’t helping the liquidity situation because the total traded volume was just one share!
What is more shocking is that Hind Industries was actually a healthily traded company, with decent volumes, at least by its small-cap standards. It wasn’t until the PCAS system introduced by SEBI which termed the company ‘illiquid’.
Hind Industries saw 78,939 shares traded in January 2013, followed by 31,525 shares in Feb 2013, and thereafter a volume of 56,873 shares in March 2013. This is a cumulative of 167,337 shares, or roughly 2,700 shares traded daily, over the three month period ending March 2013 (i.e. 62 trading days), just prior to the inauguration of the PCAS system. Last year it was greater than 1,600 shares and the year prior to that it was greater than 2,250 shares. These are decent numbers of shares traded for a small-cap company.
What happened after PCAS system came into force? The company became ‘illiquid’ overnight. The average daily traded volume tanked over 95%! In May, only 2,673 shares were traded over 23 trading days (and works out to 116 shares daily). In April, it was slightly better though, with 982 shares traded daily, but still way below the 2,700 shares in the first calendar quarter.
So much for SEBI’s effort to infuse ‘liquidity’ and “curb manipulation” through a separate window. This puts many counters at the risk of price manipulation (whether by the promoter or someone else). We had written about SEBI’s flawed PCAS policy in the past. You can access them below:
The downtrend may be arrested at around 5,600 on the Nifty
The market saw its highest percentage loss in the past 21 months, which led the rupee making fresh all-time lows. The downtrend may be arrested at around 5,600 on the Nifty. The National Stock Exchange (NSE) witnessed a turnover of 59.67 crore shares and poor advance-decline ratio of 252:1143.
The market started the day with a deep cut on comments from the US Federal Reserve that that it would scale down it bond buying scheme later this year if “unemployment reaches the vicinity of 7%”. The comments rattled the US markets on Wednesday and the Asian pack in morning trade today. Adding to investors’ woes, China’s HSBC Flash Purchasing Managers’ Index (PMI) fell to a 9-month low of 48.3 in June down from May’s reading of 49.2.
The Nifty opened 68 points lower at 5,754 and the Sensex resumed trade at 19,069, a decline of 177 points from its previous close. While the opening figure on the Sensex was its intraday high, the Nifty touched its high in opening trade itself with the index at 5,755.
Meanwhile, the rupee plunged by a whopping 130 paise to hit life-time low of 60 against the US dollar in early trade today on the Interbank Foreign Exchange on strong demand for the American currency from banks and importers.
The market continued to remain range-bound in the negative terrain in morning trade on all-round pressure led by realty, metal and banking stocks. A weak opening of the European markets added to investor woes in the second half of the trading session.
The benchmarks extended their losses in late trade on the weakening rupee and a pullout by institutional investors. The market touched its lows towards the end of trade on unsupportive global cues following comments made by the US Fed that it would scale down its stimulus programme as the economy showed signs of improvement. The Nifty fell to 5,646 and the Sensex declined to 18,687 at their respective lows.
The market finally ended near the lows of the day on across-the-board selling sparked by unsupportive global cues. The Nifty dropped 166 points (2.86%) to close at 5,656 and the Sensex tumbled 526 points (2.74%) to end the session at 18,719.
The broader indices also fell in line with the market leaders. The BSE Mid-cap index tanked 1.93% and the BSE Small-cap index dropped 1.72%.
The mayhem in the market saw all sectoral indices settling lower. The main losers were BSE Realty (down 5.18%); BSE Metal (down 4.63%); BSE Bankex (down 3.98%); BSE Power (down 3.29%) and BSE Oil & Gas (down 3.06%).
Out of the 30 stocks on the Sensex, only two stocks, Wipro (up 1.28%) and Sun Pharmaceutical Industries (up 0. 69%) settled higher. The major losers were Jindal Steel & Power (down 9.62%); Tata Steel (down 6.25%); Hindalco Industries (down 6.24%); BHEL (down 4.99%) and Sterlite Industries (down 4.52%).
The top two A Group gainers on the BSE were—Bajaj Holdings (up .73%) and Future Retail (up 1.63%).
The top two A Group losers on the BSE were—JSPL (down 9.62%) and Indiabulls Real Estate (down 9.15%).
The top two B Group gainers on the BSE were—Venus Universal (up 20%) and Filatex Fashions (up 20%).
The top two B Group losers on the BSE were—Freshtrop Fruits (down 16.30%) and Upper Ganges Sugar Industries (down 14.24%).
Of the 50 stocks on the Nifty, only two ended in the in the green, they were Sun Pharma (up 0.60%) and Ambuja Cement (up 0.05%). The key losers were JSPL (down 10.82%); Jaiprakash Associates (down 7.34%); DLF (down 7.22%); Tata Steel (down 6.97%) and Reliance Infrastructure (down 6.77%).
Markets in Asia closed in the negative on pessimism from the US and the slowdown in Chinese manufacturing output, highlighted by the HSBC Flash PMI. Chinese financials extended losses after inter-bank funding costs surged on Thursday, leading Shanghai Composite to close at its lowest levels since December.
The Shanghai Composite dropped 2.77%; the Hang Seng tanked 2.88%; the Jakarta Composite tumbled 3.68%; the KLSE Composite fell 0.59%; the Nikkei 225 declined 1.74%; the Straits Times contracted by 2.51%; the Seoul Composite lost 2% and the Taiwan Weighted settled 1.35% lower.
At the time of writing, the CAC 40 of France was down 2.42%; the DAX of Germany declined 2.50% and UK’s FTSE 100 dropped 2.30%. At the same time, the US stock futures were trading in the red.
Back home, foreign institutional investors were net sellers of equities aggregating Rs544.97 crore on Wednesday while domestic institutional investors were net buyers of shares totalling Rs415.82 crore.
Adani Power today said it has commissioned the third unit of 660 megawatt (MW) of its super critical power plant at Tiroda in Maharashtra, taking the company’s total power generation capacity to 7,260 MW. The company commissioned its first two units of 660 MW each in last financial year 2012-13 and has current generation capacity of 1,980 MW at Tiroda. The stock dropped 6.86% to close at Rs41.40 on the NSE.
Tree House Education and Accessories, a self-operated pre-school chain, has completed the business purchase transaction with Brainworks Learning Systems for a consolidated all cash value of Rs5 crore. With this transaction, Tree House has gained ownership of the Brainworks brand along with all its assets. Tree House declined 1.46% to close at Rs269.95 on the NSE.