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Mid-cap stock crash creates panic

Mumbai, Feb. 25: Around a dozen mid-cap and small-cap shares crashed on the stock exchanges today, prompting the Securities and Exchange Board of India to initiate a probe into the panic selling.

Speculation linked the crash to the selling of pledged shares, but sources said it happened after some investors decided to close their positions, triggering a panic selloff by others.

Though selling was initially witnessed in around a dozen stocks, it spread to other companies in the same sector. However, some of the affected shares managed to recover ground during the day.

Core Education & Technologies Ltd was hit the hardest, with the scrip closing at Rs 110.50, a fall of nearly 62.39 per cent from the previous close of Rs 293.85 on the National Stock Exchange.

Though there was speculation that the drop was on account of the sale of pledged shares, company sources denied the rumours.

Some of the other counters to be impacted were Aanjaneya Lifecare, Sudar Industries, Flexituff, ABG Shipyard, Welcorp and Gemini Communication, which plunged 20 per cent each.

Among other major losers, shares of Orbit Corp declined 12 per cent, while that of Opto Circuits fell 10 per cent.

The BSE midcap index fell 1.20 per cent to close at 6529.53, while the smallcap index dropped 1.36 per cent to settle at 6475.65. This came on a day the benchmark 30-share Sensex ended flat at 19331.69.

“Stocks with valuations which could not be justified fundamentally bore the brunt of today’s selling when brokers decided to close their positions. Their selling saw sharp erosion in values and it led to various brokers selling their positions in these stocks as well,” Arun Kejriwal, director of KRIS, said.

This is the second instance in less than a year when a large number of mid-cap stocks have been hammered.

In August last year, Sebi had barred 19 entities from the securities market after an initial probe into a price plunge in some mid-cap stocks.

The market regulator’s move followed a sharp fall of 20-26 per cent in the shares of Parsvnath Developers, Pipavav Defence and Offshore Engineering, Tulip Telecom and Glodyne Technoserve on July 26 on the BSE and the NSE.

 
 
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