India’s equity market snapped its longest winning streak in ten months as benchmark indices closed in the red on Tuesday, for the first time after seven days. Profit booking in PSU banks, FMCG and metal stocks dragged the benchmark indices, with the Sensex slipping below the 62,000 level after touching record highs in early trade.
The biggest fall was for Indian Railway Catering and Tourism (IRCTC) shares. The dream run in the share price of the government-run entity was halted as the stock crashed by 22 per cent on intra-day basis from the peak, post its market capitalisation touching the ₹1-lakh crore mark.
The pounding received by IRCTC also hit a few other stocks, including Tata Power, MSTC, BHEL and Tata Motor DVR that were a favourite with the bulls for the past few weeks. All these stocks fell by more than 10 per cent during intra-day trading and suffered collateral damage of the crash in IRCTC stock.
Profit booking
Most of these stocks rallied by 20 to 30 per cent in the past few weeks. Tata Power, for example, fell 10 per cent to ₹230.55 as investors booked some profits in the counter. The scrip has soared over 75 per cent in the last month. Similarly, Jubilant Ingrevia tanked 13 per cent to ₹706.25 despite reporting 43 per cent growth in net profit for the quarter ending September 2021.
As most of these stocks ran up sharply in the last few days, the valuation of most of them was stretched beyond a limit.
Though the market closed marginally lower, the pain was visible deep inside with 2,437 stocks declining on the BSE as against 935 stocks that gained. Overall, S&P BSE Sensex ended the session at 61,716 levels, down 49.5 points or 0.08 per cent. Nifty50 closed 58 points, or 0.32 per cent lower, at 18,419. It hit an all-time high of 18,604 in the morning trade. Domestic institutions continued their heavy selling. On Tuesday, they sold over ₹2,500 crore worth shares while FPIs sold ₹506 crore worth shares.
Power stocks down
For instance, power stocks, especially Tata Power, came under pressure as traders feared the pricing could be capped. The All India Power Engineers Federation on Tuesday demanded an immediate meeting of Forum of Regulators to cap power prices at energy exchanges, alleging black marketing by private operators during the ongoing coal shortage crisis.
IRCTC derails
Similarly, railway stocks, especially IRCTC, crashed on talk that Railways plan to appoint a regulator for the industry.
IRCTC’s share market valuation reaching dizzy heights and being comparable to the likes of Tesla, the American electric car maker, was invitation enough for the bear cartel to hammer the stock, market experts told BusinessLine . IRCTC was valued at around 300 times its earnings at the peak share price on Monday. Traders were pushing up the share price of IRCTC in anticipation that it enjoyed a near 100 per cent monopoly in Indian railway ticket booking and catering.
IRCTC touched a low of ₹4,995 on the BSE on Tuesday but closed slightly higher at ₹5,363 due to the average price formula to calculate the day’s closing price by the exchanges. Nearly 18 lakh shares of IRCTC were sold into open markets during the last few minutes of Monday's trading session, brokers say.
“It is the revenge of the bears. Stock markets have witnessed relentless rally in the past few months and bulls were taking stocks like IRCTC to levels unheard of for any government company in India. Market insiders say that a few leading high net worth traders were building short positions in IRCTC for the past few days since the stock was nearing the Rs ₹1 lakh crore market-cap.
As soon as IRCTC was put in the derivatives ban segment by the NSE (National Stock Exchange), selling in the cash segment led to a sharp crash,” said a leading portfolio manager in Mumbai.
NSE bans further positions in derivative counters where market-wide position limit reaches 95 per cent of the total free float. Stocks remain in ban period till the positions fall below the limits set by NSE and positions are unwound. Savvy traders are known to take advantage of such rules and have achieved a knack of pushing the price in the desired direction when stocks are in derivatives ban, experts say. Some leading traders also use this as a strategy and wait for any stock to enter the futures and options ban. IRCTC will come out of the ban list from Tuesday. Experts say if IRCTC witnessed a further sharp fall it could also create a bad environment for the upcoming IPO of another government-promoted insurance behemoth, LIC.