The BSE Sensex on Tuesday slumped 260 points and the Nifty cracked below the crucial 10,000-mark as the Securities and Exchange Board of India (Sebi) clamped down on 331 suspected shell companies listed on the exchanges. Investors were taken by surprise after the Sebi on Monday directed bourses to initiate action against the suspected shell companies. While these scrips will not be available for trading this month, brokers said the order raised concerns of more such regulatory action. Most of these companies are apparently facing probe for alleged tax evasion and corporate frauds and have been referred by the Income Tax Department and Serious Fraud Investigation Office (SFIO) to the corporate affairs ministry and Sebi for further action.
The 30-share Sensex, which lost nearly 52 points in the previous session, resumed higher at 32,341.05 and advanced to 32,354.77 in early trade. But selling pressure emerged as participants digested the Sebi order, which dragged the gauge below the 32,000-mark briefly to a low of 31,915.20. The index finally settled at 32,014.19, a loss of 259.48 points, or 0.80 per cent. The NSE Nifty dipped below the key 10,000-mark to close 78.55 points, or 0.78 per cent down at 9,978.55 after shuttling between 10,083.80 and 9,947. Meanwhile, the rupee staged a strong comeback after a brief overnight slump to close higher at 63.63, a smart 17 paise gain even as the US dollar’s recovery against major rivals overseas short-lived.
Vinod Nair, Head of Research, Geojit Financial Services, “the market faced the heat of selling pressure and finally ended below 10k as the SEBI’s call to put restrictions on shell companies raised concern among investors. In the meantime, the metal stocks stole the show which outperformed the major indices and countered the slid to some extent.” The regulator’s directive came after the corporate affairs ministry shared a list of 331 listed companies that are suspected to be shell entities and could even face “compulsory delisting”. Stepping up the surveillance measures, these entities would be subject to independent audit and if required, forensic audits could also be initiated to check their credentials.
“The abruptness of SEBI order on shell companies has had a cascading effect on an indecisive market which had seen recent surge in VIX and restrained approach from FIIs in the equity segment. Clearly, markets are looking for fresh triggers, as broad market earnings picture has failed to match peak index valuations,” said an analyst with a leading broking firm. Dr Reddy’s was the worst performer in the Sensex pack, losing 4.91 per cent. Other laggards included SBI, ITC, ICICI Bank, NTPC, Power Grid, Axis Bank, ONGC, Maruti Suzuki, Hero MotoCorp, Sun Pharma, Kotak Mahindra Bank, Lupin, Reliance Industries, L&T, HDFC Bank, Infosys, Asian Paints, Wipro, TCS and HDFC. Tata Steel emerged as the top gainer by climbing 2.63 per cent after the company returned to profit in the quarter ended June 30, 2017.
Among the sectoral indices, realty was the hardest hit, down 4.53 per cent, followed by oil & gas (2.16 per cent), PSU (2.08 per cent), power (1.88 per cent), FMCG (1.50 per cent), bank (1.34 per cent), healthcare (1.32 per cent), capital goods (0.93 per cent), teck (0.65 per cent), IT (0.60 per cent) and auto (0.39 per cent). The Indian currency had retreated from its 2-year high on Monday and lost 22 paise after four days of bull run. The domestic unit resumed on a firm note at 63.77 from Monday’s close of 63.80.