Sensex, Nifty end in green; Sebi to probe midcap crash

Key equity benchmarks ended trade on Monday flat with a positive bias. The Sensex closed up 14.68 points at 19331.69, and the Nifty ended up 4.45 points at 5854.75.

However, shares of a host of mid-cap and small-cap companies today crashed in the stock market, plunging as much as 60 percent in some cases, amid panic selling on speculations of sale of pledged shares.

Stock exchanges and market regulator Sebi immediately began looking into the matter to probe any possible foul play after a huge sell-off was witnessed in shares of more than a dozen companies towards noon, a senior official said.

The BSE Midcap and Small-cap indices were down 1.33 percent each.

Shares of a host of mid-cap and small-cap companies today crashed in the stock market, plunging as much as 60 percent in some cases, amid panic selling on speculations of sale of pledged shares.

Stock exchanges and market regulator Sebi immediately began looking into the matter to probe any possible foul play after a huge sell-off was witnessed in shares of more than a dozen companies towards noon, a senior official said.

While the problems were initially limited to about 10-12 stocks initially, the panic selling was seen spreading to other companies from the sectors of affected stocks, he added.

As per the stock exchange data, Core Projects was down 62 percent, Welcorp was down 25 percent, while Aanjaneya Lifecare, ABG Shipyard, Flexituff and Gemini Comm were down 20 percent each.

Besides, shares of Orbit Corp, Eros International Media, Opto Circuits, Saamya Biotech, Videocon Industries and Sanraa Media were also down by over 10 percent. Sources said that the mid-cap crash could have been triggered by huge sell orders placed by certain connected entities and the matter was being probed.

The BSE Midcap and Small-cap indices were down 1.33 percent each, although the benchmark Sensex was almost flat with a marginal decline of 0.09 percent at 19,300.45 points.

The pace at which equity benchmark slipped have stumped market watchers. In mid-afternoon trade, Nifty was threatening to breach 5800 with declines taking over advances decisively. However, the fall was arrested at 12.48 PM, with Nifty trading with a cut of 9 points at 5838 and Sensex falling 28 points at 19285.

Midcaps were butchered mercilessly with individual stocks like Core Technologies and Welspun losing over 50 percent and 26 percent, respectively on speculation that the pledged shares of these companies were being sold off. Controlling stakeholders of Indian companies often receive loans from financial institutions, pledging their shares as collateral, making these stocks vulnerable to any rumours of liquidations.

The sell-off has created a domino effect on DB realty, ABG Shipyard, Orbit Corporation and Eros International. Analysts, referring to market talks, say these stocks have fallen as a result of one brokerage liquidating derivative positions.

NSE sources said share price fall appears to be market-linked. Speaking to CNBC-TV18, management of Eros International refuted reports of pledged shares being sold off.

The Sensex gains 0.27 percent, rebounding after hitting its lowest close since December 24, 2012 on Friday. The Nifty is also up 0.25 percent.

Infosys Ltd gains 2 percent, while Tata Consultancy Services Ltd is up 1.3 percent on hopes of incentives for exporters in the 2013/14 Budget to be unveiled on February 28.

Shares in non-banking financial companies gain on Monday after the central bank issued guidelines allowing any business sector to apply for banking licences.

Mahindra and Mahindra Financial Services gains 5.6 percent, while IDFC Ltd is up 1.7 percent.

However, Oil and Natural Gas Corp falls 0.8 percent on expectations of higher oil subsidy burden from the 2013/14 budget, say dealers.

Oil and gas, realty and FMCG have emerged as laggards in the morning trade dragging the indices to a flat opening . Stocks from the IT and utilities sectors were lending some amount of support to the benchmarks.

At 09.29 AM, the Sensex fell 5.28 points to 19311.73, and the Nifty went down 1.30 points at 5849.00. Asian stocks have been trading mixed with a few  indices extending last week's advance, as Japanese shares gained on speculation that next Bank of Japan governor will deploy aggressive monetary easing.

Top gainers on the indices were Ranbaxy Labs (up 3.13 percent), which rose on news that it has restarted production of generic Lipitor for US market. Power Grid, Wipro, Infosys and IDFC were other lead gainers.

Among losers, Realty major DLF was the worst hit falling 1.39 percent after making big moves last week. In the oil & gas space, ONGC lost 0.2 percent after Essar Energy reprtedly indicated that it wanted the public sector oil giant out of Cambay JV. ONGC also refused to share cost of further exploration in Cairn's Rajasthan block. However, BPCL was the biggest loser in this sector trading with over 1 percent cut.