Shares of firms, where billionaire Rakesh Jhunjhunwala holds stakes, have been caught in a downward spiral in the past 10 days, leaving ardent followers wondering whether the resilience in some of these stocks in this year's weak market was a mirage.
VIP Inds, Autoline Inds, Orchid Chemicals and Subex shares have declined 15-28% since November 4 compared to the 4% drop in the Nifty in the period.
The stock declines come amid speculation Jhunjhunwala is cutting stakes in some of his long-term stock holdings to make good for the losses in silver and equities trading. Brokers said the decline has unnerved many investors, who track Jhunjhunwala closely in their stock purchase decisions.
"Some of these stocks were trading at premium valuations, because of his presence in them. So, when such rumours float around, investors are bound to dump the stocks, because then there is little incentive to hold on to them," said AK Prabhakar, senior VP-equity, Anand Rathi Financial Services.
Analysts said investors are focusing more on issues that could squeeze profits of these companies over the next few quarters. For instance, investors are worried about the impact of the weakening rupee on VIP Industries' margins. Similarly, the rise in interest costs of Autoline has caught the eye of investors. In the case of Subex, the low promoter shareholding is becoming a cause for concern.
While some traders speculate Jhunjhunwala may be trimming stakes in these companies because of profit worries, others believe there is more to it. A theory goes that Jhunjhunwala, who has earned the sobriquet of the Big Bull of Dalal Street, had traded heavily in silver futures and the collapse in the precious metal since April forced the investor to sell part of his holdings to raise the deficit in margins. Another version doing the rounds in the market is that Jhunjhunwala bet on a rise in the Nifty and a few stocks recently and was caught on the wrong foot in the decline in the past week.
Rakesh Jhunjhunwala declined to comment on the matter. His terse reply was, "Let speculation remain speculation. People can say anything they want, I have no comments." He added, "I never talk about my trading bets."
Investors are also worried a further slide in these shares could trigger margin calls where promoters have pledged a significant portion of their holdings. Promoters of Provogue, Orchid and Subex have pledged more than half of their holdings.
VIP Inds, Autoline Inds, Orchid Chemicals and Subex shares have declined 15-28% since November 4 compared to the 4% drop in the Nifty in the period.
The stock declines come amid speculation Jhunjhunwala is cutting stakes in some of his long-term stock holdings to make good for the losses in silver and equities trading. Brokers said the decline has unnerved many investors, who track Jhunjhunwala closely in their stock purchase decisions.
"Some of these stocks were trading at premium valuations, because of his presence in them. So, when such rumours float around, investors are bound to dump the stocks, because then there is little incentive to hold on to them," said AK Prabhakar, senior VP-equity, Anand Rathi Financial Services.
Analysts said investors are focusing more on issues that could squeeze profits of these companies over the next few quarters. For instance, investors are worried about the impact of the weakening rupee on VIP Industries' margins. Similarly, the rise in interest costs of Autoline has caught the eye of investors. In the case of Subex, the low promoter shareholding is becoming a cause for concern.
While some traders speculate Jhunjhunwala may be trimming stakes in these companies because of profit worries, others believe there is more to it. A theory goes that Jhunjhunwala, who has earned the sobriquet of the Big Bull of Dalal Street, had traded heavily in silver futures and the collapse in the precious metal since April forced the investor to sell part of his holdings to raise the deficit in margins. Another version doing the rounds in the market is that Jhunjhunwala bet on a rise in the Nifty and a few stocks recently and was caught on the wrong foot in the decline in the past week.
Rakesh Jhunjhunwala declined to comment on the matter. His terse reply was, "Let speculation remain speculation. People can say anything they want, I have no comments." He added, "I never talk about my trading bets."
Investors are also worried a further slide in these shares could trigger margin calls where promoters have pledged a significant portion of their holdings. Promoters of Provogue, Orchid and Subex have pledged more than half of their holdings.
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
Nothing in this article is, or should be construed as, investment advice.
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