Stock Market

Blood on the Street! Bears maul Bhangaar stocks brutally, very few survive

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On Dalal Street, the bear grip on smallcaps has been very brutal through the first six months of this calendar year, with the BSE Smallcap index falling nearly 17 per cent year-to-date till June 29. Curiously, businesses linked to the entertainment sector, especially film making, have been the hardest hit, as were those belonging to construction firms. Penny stocks, often referred to as Bhangaar stocks in market parlance, are those that trade below Rs 10.

Subdued earnings, ballooning bad debt, corporate governance issues and high valuations are some of the issues that have kept these stocks under pressure.

Some 200 penny stocks on the BSE eroded up to 95 per cent of investors’ wealth this year in this selloff. Monotype India saw the biggest plunge at 94.80 per cent, falling from Rs 5.4 on January 1 to Rs 0.30 on June 29.

It was followed by SRS Real Infrastructure (down 88 per cent), Sawaca Business Machines (down 85 per cent), ACI Infocom (down 84 per cent), Hindustan Dorr-Oliver (down 82 per cent), GTL Infrastructure (down 81 per cent) and IVRCL (down 80 per cent). Top LosersOf the nearly 300 penny stocks, only 10 per cent have given positive returns to investors this year.

Three of them – Mega Corporation, Bio Green Papers and ObjectOne Information – have emerged Davids of penny stocks, rising 151 per cent, 127 per cent and 118 per cent, respectively. Among others, MPS Infotecnics, Vegetable Products, Zenith Birla (India) and Vax Housing Finance Corporation climbed between 45 per cent and 77 per cent during this period.

Top GainersPenny stocks are high-risk bets and are strictly a no-no for weak-hearted and conservative investors.

Before taking any position in such stocks, one should check promoter background and holdings, company’s financials, debt levels and share pledge positions. Sector-wise, construction space bled the most; with stocks like Yogi Infra Projects, KCL Infra Projects, Hazoor Multi Projects, SRS Real Infra, BSEL Infra, Country CondoS, Landmark Property, Satra Properties and PVP Ventures plunging up to 88 per cent. The BSE realty index, representing property developers, is down 21 per cent for this period.

Industry biggie DLF is down 26 per cent. Companies engaged in the business of film production, distribution and entertainment such as BAG Films, Radaan Mediaworks, BGIL Films, Picturehouse Media and GV Films have lost up to 66 per cent.

Baba Arts stood apart to advance 14 per cent. Their midcap peer PVR is down around 4 per cent for this period. Among well-known names, Alok Industries has risen 4.40 per cent so far in 2018, whereas Assam Company India and Empee Sugars have dipped 54 per cent and 72 per cent, respectively.

Tata Teleservices (Maharashtra) declined 38 per cent. Remember, these stocks are not meant for the risk-averse.

Also, the bourses regularly suspend such stocks over regulatory issues.

If a bigger stock falls to the level of penny stock, it is often a sign of the company going out of business. (Disclaimer: ETMarkets.com does not promote investing in penny stocks.

All the information given in the article is for information purpose only.)




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