Mid,small caps crash; Core Edu dips 62.4

Sebi probing possible links to a rogue trader

Over a dozen mid- and small-sized stocks plunged on Monday amid speculation that the pledged shares of these companies were being unloaded.

According to sources,market regulator Sebi and the bourses have begun probing into any possible manipulation after the sell-off was witnessed in more than a dozen shares. Core Education,a constituent of the BSE Mid-Cap index,dropped a staggering 62.4 per cent to settle at Rs 110.95. ABG Shipyard down 20 per cent,Welspun Corp down 19.86 per cent,Opto Circuits India down 10.26 per cent,DB Realty down 9.94 per cent and Essar Ports off 7.45 per cent were the other major loses from the BSE Mid-Cap index.

Rupa amp; Company down 10.34 per cent,Kamat Hotels down 8.71 per cent,Genesys International down 8.58 per cent and Hindustan Oil Exploration down 7.83 per cent were the major losers from the BSE Small-Cap index. Some of these firms have a significant amount of pledged promoter shares and there were indications about margin-calls being triggered on these counters.

Clarifying the situation,a statement from Core Education said,We would like to clarify that none of the shares that the company has pledged with financial institutions has been sold and the company has confirmed with all the financial institutions that they continue to hold the same.

In a stock exchange filing,Aanjaneya Lifecare said,We find a huge fluctuation in the market prices of our scrip and it is disturbing for us. In order to achieve the growth plans of the company,we are in dialogue with our international bankers for raising resources for the expansion through FCCB. The international investors are cautious due to wide fluctuation in the market price of our scrip.

Promoters of Indian companies often receive loans from financial institutions,pledging their shares as collateral. However,promoter pledging make these stocks vulnerable to any rumours of liquidations. There was persistent speculation of funding issues that are leading to the sell-off of pledged shares. Shares of a real estate firm fell 31.2 per cent in January on continued market speculation over its debt repayments.

There was a deliberate attempt to pull down select small-cap stocks on Monday after spreading rumours on sale of pledged stocks. Sebi needs to plug loopholes in issues related to share pledging, said BSE dealer Pawan Dharnidharka.

Story continues below this ad

Sebi had barred 19 entities from the securities market last year after an initial probe into share price plunge in some mid-cap stocks. The Sebi decision followed a sharp plunge of 20-26 per cent in the shares of Parsvnath Developers,Pipavav Defence and Offshore Engineering,Tulip Telecom and Glodyne Technoserve on July 26.