 "BSE Smallcap extends fall, plunges 5% in 4 days; 36 stocks hit 52-week lows")
Shares of smallcap companies have continued trading under pressure, with the BSE SmallCap index falling 2 per cent in Tuesday’s intra-day trade, led by a persistent selling by foreign institutional investors (FIIs) coupled with muted domestic earnings.
At 10:30 AM, the BSE Smallcap index, the top loser among the broader market indices, slipped 1,261 points or 2.3 per cent at 54,387. In comparison, the BSE Midcap index and BSE Sensex were down 1.3 per cent and 0.40 per cent, respectively. In the past four trading days, the BSE Smallcap index has declined by 5 per cent.
In the current month, up to October 21, FIIs have offloaded Indian equities worth a total of Rs 82,845 crore, data from NSDL showed. Domestic institutional investors (DII), on the other side, have made net purchases of Rs 74,176 crore during the period.
Dr. V K Vijayakumar, chief investment strategist of Geojit Financial Services, says that valuations in the Indian markets are higher, even after the sustained selling by FIIs.
"The fact is that even after the correction triggered by the sustained FII selling, Indian market valuations are higher than historical averages, even though largecap valuations can be justified by their long-term growth prospects," said Vijayakumar.
Dr. V K Vijayakumar, chief investment strategist of Geojit Financial Services, says that valuations in the Indian markets are higher, even after the sustained selling by FIIs.
"The fact is that even after the correction triggered by the sustained FII selling, Indian market valuations are higher than historical averages, even though largecap valuations can be justified by their long-term growth prospects," said Vijayakumar.
Vardhman Holdings, Authum Investment & Infrastructure, Amber Enterprise India, PNC Infratech, Jana Small Finance Bank, Antony Waste Handling Cell, Renaissance Global, Garden Reach Shipbuilders & Engineers and Gravita India, a part of the BSE SmallCap index, were down between 7 per cent and 12 per cent in intra-day trade on Tuesday, October 22.
In the same vein, RBL Bank, PNC Infratech, Aptech, CSB Bank, Equity Small Finance Bank, Goodyear India, Jammu & Kashmir Bank, MTAR Technologies, Shalimar Paints, Ujjivan Small Finance Bank and Utkarsh Small Finance Bank were among the 36 stocks from the SmallCap index that hit their respective 52-week lows during Tuesday's trading session.
Among the individual stocks, PNC Infratech hit a 52-week low of Rs 301.3, plunging 18 per cent, and extending its previous day’s 20 per cent fall after the Ministry of Road Transport & Highways (MoRTH) disqualified the company from participating in any tender process of the ministry for a period of one year, effective from October 18, 2024.
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The decision stems from an investigation involving a First Information Report (FIR) filed by the Central Bureau of Investigation (CBI) in June 2024. After a personal hearing and submission of evidence by PNC Infratech and its subsidiaries, the road ministry had passed the disqualification order, citing concerns over violations related to the FIR.
However, the management indicated that they do not expect any material impact on the ongoing development, operations and maintenance (O&M) activities of the company and its subsidiaries, including the two special purpose vehicles (SPV) on account of the road ministry order.
PNF Infra also informed on Monday that along with its two SPVs, it has filed three separate Writ Petitions before the Delhi High Court to challenge the road ministry's (Impugned) order on October 21. That apart, it has also filed three separate applications requesting the Delhi High Court to pass an ad-interim orders staying the effect, operation and implementation of the impugned order with immediate effect, till the disposal of the Writ Petitions.
Meanwhile, shares of RBL Bank hit a fresh 52-week low of Rs 173.10, plunging 16 per cent in two days after the bank reported a 24 per cent year-on-year (YoY) decline in its Q2 net profit at Rs 223 crore, owing to higher growth in expenses.
The net interest income (NII) of the bank rose 9 per cent Y-o-Y to Rs 1,615 crore from Rs 1,475 crore a year ago. The NII was impacted by interest reversals from slippages and lower disbursals in microfinance.
The bank's net interest margin (NIM) slipped to 5.04 per cent for Q2FY25, from 5.54 per cent a year ago and from 5.67 per cent in June 2024.
Fresh slippages increased to Rs 1,030 crore, mainly due to the microfinance and credit card (CC) segments. Gross non performing assets/ net NPA ratios ((GNPA/NNPA) rose 19bp/5bp quarter-on-quarter (QoQ) to 2.88 per cent/0.79 per cent. PCR moderated 15bp QoQ to 73 per cent.
Fresh slippages increased to Rs 1,030 crore, mainly due to the microfinance and credit card (CC) segments. Gross non performing assets/ net NPA ratios ((GNPA/NNPA) rose 19bp/5bp quarter-on-quarter (QoQ) to 2.88 per cent/0.79 per cent. PCR moderated 15bp QoQ to 73 per cent.
According to CARE Ratings, the microfinance industry is currently facing a significant rise in delinquencies, primarily driven by increasing borrower indebtedness, which has been further compounded by various factors, such as heat waves, the recently concluded general elections, and political movements like the “Karja Mukti Abhiyan.”
This challenge is further aggravated by the weakening of the joint liability group model, characterised by a notable decrease in center attendance, diminished peer pressure and collective accountability, which have historically helped maintain low default rates, the ratings agency said.
The microfinance sector continues to be impacted by the inherent risk involved in the segment. These include socio-political intervention risk and regulatory uncertainty, apart from risks emanating from unsecured lending and the marginal profile of borrowers who are vulnerable to economic downturns besides operational risks related to cash-based transactions.