CPSE index plunges 6%; Rites, IRFC, RVNL, Hudco, MTNL, IRCON tank up to 12%

Despite today's decline, in the past six months, the CPSE index has outperformed the market by surging 47 per cent, as compared to 8 per cent rise in the BSE Sensex

Shares of Central Public Sector Enterprises (CPSEs) were under sharp pressure on Wednesday, slumping up to 12 per cent on the BSE in intra-day trade amid a broad market sell-off.

At 12:26 pm; the BSE CPSE index, was the top loser among indices, having tanked nearly 6 per cent, while BSE PSU index plunged nearly 5 per cent.

In comparison, the S&P BSE Sensex was down 1 per cent, while the S&P BSE Midcap and S&P BSE Smallcap index were down 3.7 per cent and 4.5 per cent, respectively.

The BSE CPSE index is designed to measure the performance of CPSEs listed on BSE. CPSEs are companies, whose 51 per cent or more of direct shareholding belongs to the central government.

Among individual stocks, RITES plunged 12 per cent to Rs 609. MTNL (Rs 32.89), Bharat Immunologicals (Rs 26.94) and Housing & Urban Development Corp (HUDCO) (Rs 163.80) were locked in the 10 per cent lower circuit with no buyers in these counters.

RailTel Corp, IRCON International, Indian Railway Finance Corp (IRFC), National Aluminium Company, SJVN, Engineers India, Rail Vikas Nigam (RVNL) and NHPC were down between 9-10 per cent.

Despite today's decline, in the past six months, the CPSE index has outperformed the market by surging 47 per cent against an 8 per cent rise in the BSE Sensex.

In the past one year, the CPSE index has zoomed 92 per cent as against a 25 per cent rally in the benchmark index.

Analysts say the pain is likely to continue in the broader market amid stretched valuation and red flags from the market regulator the Securities and Exchange Board of India (SEBI).

"The mandatory disclosure format for mutual funds shared by SEBI to look at the stress situation in the funds, will be out by March 15. This is also adding to the ongoing concerns. Thus, volatility in midcap and smallcap could keep the benchmark indices in check, " said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services. 

The excessive valuations in the broader market segments driven by the irrational exuberance of retail investors has been a concern for many months now. But it has taken the strong message from the regulator SEBI to trigger a correction in the Nifty Smallcap index, said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Actions from mutual funds also indicate the excessive valuations in the broader market. ICICI Pru has joined two other leading funds in stopping lump sum investments in their mid and smallcap schemes. More are likely to follow, the analyst said.