News reports that the Centre plans to sell 10 per cent stake in Coal India Ltd (CIL) spooked the stock price, which crashed by nearly 6 per cent in morning trade today.

In fact the stock dived to its 52-week low in the BSE after reports of the stake sale surfaced. Apparently, it is the timing rather than the actual stake sale that has unnerved the markets since the promoter holding, which is at 90 per cent now, would have to be cut to 75 per cent to comply with SEBI norms in another three months.

More importantly, the Government, which is struggling to draw investor interest for its divestment process with the State-owned insurance behemoth LIC frequently playing the role of a White Knight to rescue its OFS offers, was expecting to garner Rs 20,000 crore through its Coal India divestment exercise, it was mentioned.

The CIL stock, which plunged to its 52-week low of Rs 300.50 in the BSE, had recovered marginally to Rs 301.95, down by Rs 18.05 or 5.64 per cent, with a trading volume of about 2.13 lakh shares.

The stock is not trading very cheap currently as its PE ratio is around 23. But with commodity play coming under stress because of issues relating to coal mining and since CIL itself is facing criticism from a large institutional investor from abroad, there are apprehensions as to how the entire process of divestment in the stock would pan out.

Though technically the GoI divestment of a part of its stake in CIL means only the ownership of those shares would change and the equity capital will not expand, this might lead to more shares being off-loaded onto the market and that unnerves the investors.

Reports that the Cyprus Government is imposing a levy on bank deposits has unsettled the markets and more clarity would emerge as to how the European markets behave when they open a little while from now.

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