Midcaps nosedive; brokers suspect pledge shares sell-off

Core Education shares plunged around 60 percent, leading the wave of distress sales in many mid-cap shares today. The reason for the freefall is not yet clear, but brokers said it could most likely be due to financiers selling the shares pledged with them by promoters or market operators. Another theory doing the round is that the slide may have been sparked off by some brokerages liquidating derivative positions of some of their large clients, because of their inability to honour margin commitments.

Shares of Eros International , ABG Shipyard , Welspun Corp , Orbit Corp , Opto Circuits , Aanjaneya Lifecare were down between 13-30 percent.

Core Education shares were trading around Rs 121, down 59 percent over their previous close. Stock exchange data shows that the percentage of promoter holdings pledged with lenders rose from around 27 percent in March last year to around 47 percent by December. It is not clear at this stage though, if the steep fall was caused by sale of pledged shares.

Trading in ABG Shipyard and Aanjaneya were frozen at the lower end of the 20 percent intra-day circuit filter, and trading in DB Realty was frozen at the lower end of the 10 percent intra-day circuit filter.

Brokers said that many traders had built up huge positions in midcap shares during the rally in December and January, hoping that the uptrend would sustain till Budget. But with liquidity drying up over the last few weeks, the stock prices have been falling, and these traders had to pay marked-to-market margins almost on a daily basis.

Brokers said the fall would been magnified by the low liquidity in most of these stocks, forcing other traders to panic and join the selling spree.