Small investors are trapped in some mid and small-cap company stocks, which have crashed 70-80 per cent and are locked in continuous lower circuit for nearly a month now. The stocks include Shree Ashtavinayak Cine Vision, SVC Resources, Money Matters Financials and the recently-listed Midfield Industries.
In fact, the case of Shree Ashtavinayak, a Mumbai-based movie production house which made over Rs 100 crore after it released recent hits like Dabangg and Goalmal 3, is a curious one. Investors, who put their money in this stock looking at the collection of blockbuster movies, were in for a rude shock. The share price has crashed from a high of Rs 51 in November to Rs 10.7 on the Bombay Stock Exchange on Thursday.
Similar is the case of Midfield, which rose over two times from a initial public offer price of Rs 133 in August to touch a high of Rs 455 on November 11. The stock was traded at Rs 123 on BSE on Thursday. SVC Resources, which touched a high of Rs 358 on November 5, was traded at Rs 89.9 on BSE on Thursday.
| DWINDLING EARNINGS | ||||
|
52-week high | Current price | % Change | ||
| Date | Price | |||
| Money Matters | 29-Oct | 787.00 | 151.80 | -80.71 |
| Shree Ashtavinayak | 5-Nov | 51.20 | 10.75 | -79.00 |
| SVC Resources | 5-Nov | 358.70 | 89.90 | -74.94 |
| Midfield Ind | 11-Nov | 455.80 | 123.25 | -72.96 |
| Compiled by Bs Research Bureau | ||||
These stocks, say market players, have come under selling pressure from a few large Mumbai- and Gujarat-based brokers, who are trying to recover over Rs 200 crore that they had extended to punters by accepting the shares as margin. Sell orders of over 40 million were pending in these counters.
Under large margin funding deals, till recently, brokers provided up to 90 per cent of funds to traders and accepted the small and mid-cap stocks as margin. Traders then used these funds to dabble in the same stocks, which they had kept as margin with brokers. It was a win-win situation, as the share price of these stocks rose two to three times and both traders and margin money providers knew that the risk of any major sellers in the counter were less after large chunk of shares were already cornered by them and price would not fall.
Brokers provide margin funding through their non-banking finance companies, which in turn raise the money through debt placements and bank guarantees.
According to market players, the problem started after the Securities and Exchange Board of India (Sebi) recently banned stock operator Sanjay Dangi and promoters of Ackruti City, Murli Industries, Welspun Corp and Brushman for their alleged involvement in price rigging. Further, when a “so-called report” of the intelligence bureau naming operators like Ketan Parekh and others was circulated, fear of massive crackdown gripped broking firms. They raised margin requirements and also started calling back huge loans.
Other counters like Karuturi Global, Hanung Toys, Shiva Fertiliser, Parekh Aluminium, Syncom Healthcare, Valecha Engineering, Delta Corp, Parsvnath Developers, K S Oil, Videocon, Gokul Refoils, J Kumar Infra and GSS America, where leveraged positions were high, fell between 20 and 40 per cent. However, the stocks are now on a recovery mode as a settlement was reached between some big traders and brokers. Also, company promoters had announced buyback in some counters.
In SVC, 19 per cent of companies shares were held by retail investors, in Midfield 22 per cent, in Shree Ashtavinayak 19 per cent and in Money Matters 0.76 per cent shares were held by retail individuals.
