After they rallied with the herd during the recent run-up in the stock markets, reality has hit stocks
Each time a bull-run occurs, the stock markets take along most of the market constituents on the joyride, regardless of company fundamentals and outlook. During the rally that began in March last year, many such companies found their stocks reaching sky-high prices, despite poor valuations. But now, the markets have taken a U-turn and reality has hit hard.
The Sensex began its downward slide on 7 April 2010 when it closed at a high of 17,970. On 24 May 2010, the Sensex closed at 16,470, down 8%. This bearish phase has taken the wind out of the sails of many stocks that were cruising along just about a month ago.
Among the worst hit in the Moneylife database of 1,334 companies is Syncom Healthcare, which was trading at a price of Rs95 before the markets caught a cold. Now, it finds itself down by 59%, at around Rs39.
Texmo Pipes and Products, which made its public listing on 10th March this year, has also lost its footing. It is now trading at Rs42, down 53% from its price on 7th April. Panoramic Universal and Amrutanjan Health Care have taken a massive beating. While Panoramic has crashed 50%, Amrutanjan has suffered a 48% erosion in market valuation.
Aban Offshore and BAG Films & Media have recorded a 44% and 43% fall, respectively, in their stock prices. Aban Offshore is now trading at Rs701 from its high of Rs1,251. The company is deep in debt and is paying the price of overexpansion of the previous run-up of oil prices in 2008. BAG Films has dropped from Rs26 to Rs15 during this period. The fact that it is controlled by Anuradha Prasad, wife of Rajeev Shukla, a former journalist and a Congress MP, has not prevented it from crashing.
KM Sugar Mills also finds its stock price trading 40% lower at Rs5. Investors are selling sugar stocks because of excess sugar supply. Educomp Solutions, which was flying high at Rs748 just over a month ago and was a ‘must-have’ concept stock for institutional investors, is now trading at Rs485, down a sharp 35%.
Interestingly, among the losers are two software stocks that had witnessed phenomenal growth during the record market rally. Mastek has lost 35% of its market valuation over this period while Crane Software International, which claims to be in high-end software, has suffered a 33% drop.
The last big wave of selling is on the cards
The market witnessed a steep plunge, closing at a three-month low on the back of negative global cues. The Sensex plunged 509.40 points in intraday trade to go below the 16,000 level. It shut at 16,022.48, down 447.02 points (2.71%). The Nifty tanked 137.20 points (2.78%), to close at 4,806.75.
All Asian equity markets finished in negative terrain on Tuesday as worries over the European debt crisis erupted when the Bank of Spain stepped in to rescue CajaSur, a savings bank (which has $16.36 billion of outstanding loans), after the bank failed to finalise a merger. The seizure of CajaSur brings up further concerns over Spain’s creditworthiness.
The Shanghai Composite declined 50.79 points or 1.90% to 2,622.63; the Hang Seng dropped 682.26 points or 3.47% to 18,985.50; the Jakarta Composite fell 95.49 points or 3.66% to 2,514.12 and the KLSE Composite slipped 23.56 points or 1.85% to 1,250.13.
Similarly, the Nikkei 225 tumbled 298.51 points or 3.06% to 9,459.89; the Straits Times shed 72.68 points or 2.67% to 2,651.19; the Seoul Composite dipped 44.10 points or 2.75% to 1,560.83 and the Taiwan Weighted was down 236.36 points or 3.23% to 7,086.37.
US markets once again closed in the red overnight, led by a late sell-off. The major indices made a positive start, but as the day proceeded, worries over the European debt crisis and uncertainty about the US government’s financial overhaul plan made investors cautious and led the indices into the red. The Dow lost 126.82 points (1.24%), to 10,066.57. The S&P 500 fell 14.04 points (1.29%), to 1,073.65, and the Nasdaq closed lower by 15.49 points (0.69%), to 2,213.55.
Back home, petroleum minister Murli Deora hinted on Monday that prices of auto and cooking fuels might be hiked following an inter-ministerial meeting on 7th June amidst surging under-recoveries of the three public sector oil marketing companies—Indian Oil, HPCL and BPCL.
Cipla was the only one stock in the Sensex which managed to settle in the green while Sun Pharma and Siemens were the only stocks to end higher on the Nifty.
The major losers on the Sensex were Reliance Communications (RCom) down 6.32%, Hindalco Industries was down 5.43%, Tata Motors was down 4.66%, Sterlite Industries was down 4.49% and Tata Steel was down 4.45%.
The top losers on the Nifty were SAIL (down 6.09%), RCom (down 5.81%), Hindalco (down 5.63%), Jindal Steel (down 5.59%) and Ambuja Cements was down 5.58%.
All sectors on the BSE sectoral space ended in the red. The main losers were metal (down 5.10%), consumer durables (down 4.45%), capital goods (down 3.09%) and oil & gas (down 2.58%).
The wireless broadband access (BWA) spectrum auction kick-started on Monday. On the first day itself, the price for a pan-India spectrum rose by as much as 34.5% above the base price of Rs1,750 crore, to close at Rs2,354.53 crore.
A total of five clock rounds were completed on Monday with the government revenue touching Rs4,706.36 crore at the end of the day. If the payment from the publicly owned BSNL and MTNL is also included, the government revenue will surge further to Rs6,940 crore.
At the time of writing, the Dow was trading 210.40 points down at 9,856 and European markets were all down 2%-4%.
The retail investor category was subscribed 0.01 times while the FII category received zero bids
Standard Chartered Plc’s Indian depository receipts (IDR) issue, which hit the market today, has received a lacklustre response from foreign institutional investors (FIIs) and retail investors.
Retail investors bid for 7.22 lakh shares out of the total quota of 7.20 crore shares. The retail category was subscribed 0.01 times. Retail investors have been given a 5% discount in this issue. The Foreign Institutional Investor (FII) category received zero bids.
The Qualified Institutional Buyers (QIBs) category was subscribed 0.12 times from 8.40 crore shares reserved under the category. Domestic Institutional Investors (DIIs) bid for 86.95 lakh shares while mutual funds (MFs) bid for 17.10 lakh shares.
Similarly, the Non-Institutional Investor (NII) quota saw a lukewarm response. It was subscribed 0.0009 times, and received bids for just 40,800 shares from individuals. Even corporates have shied away from investing on the first day, which saw zero bids.
Employees subscribed for just 1,600 shares from the reserved quota of 48 lakh shares. The company has 20.40 crore shares on offer, including 3.60 crore shares for anchor investors at a price of Rs104 per share. The company has 16 anchor investors on board. Overall, the issue was subscribed 0.05 times on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
The company is planning to raise Rs2,400 crore-Rs2,760 crore through the IDR issue with a price band of Rs100-Rs115. The issue opened today and closes on 28 May 2010.