Profit booking ends markets’ winning streak

India’s stock market posted its longest winning streak in ten months as benchmarks closed in the red on Tuesday for the first time after seven days. Profit booking in PSU banks, FMCGs and metal stocks dragged the benchmarks down, with the Sensex slipping below the 62,000 level after hitting record highs in early trading.

The biggest drop was for Indian Railway Catering and Tourism (IRCTC) stocks. The government-run entity’s share price dream run was halted as the stock tumbled 22% on an intraday basis from the top, after its market capitalization hit the bottom. ₹1 lakh crore mark.

The hammering received by the IRCTC also hit a few other stocks, including Tata Power, MSTC, BHEL and Tata Motor DVR, which were bull favorites over the past few weeks. All of these stocks fell more than 10% during intraday trading and suffered collateral damage from the IRCTC stock crash.

Profit booking

Most of these stocks have climbed 20-30% in recent weeks. Tata Power, for example, fell 10% to ₹230.55 as investors booked profits on the meter. The certificate has soared over 75% in the past month. Similarly, Jubilant Ingrevia fell 13% to ₹706.25 despite growing its net profit by 43% for the quarter ending September 2021.

Since most of these stocks have risen sharply in recent days, the valuation of most of them has exceeded a limit.

Although the market closed slightly lower, the pain was visible deep inside with 2,437 shares down on BSE versus 935 shares gaining. Overall, the S&P BSE Sensex ended the session at 61,716 levels, down 49.5 points or 0.08%. Nifty50 closed 58 points, or 0.32% lower, at 18,419. It hit an all-time high of 18,604 in morning trade. National institutions continued their strong sales. On Tuesday, they sold shares worth over ₹2,500 crore while REITs sold shares worth ₹506 crore.

Declining stocks

For example, energy stocks, particularly Tata Power, came under pressure as traders feared prices were capped. The All India Power Engineers Federation on Tuesday demanded an immediate meeting of the Regulators Forum to cap electricity prices on power exchanges, alleging black marketing by private operators during the ongoing coal shortage crisis.

The IRCTC goes off the rails

Similarly, railway stocks, particularly the IRCTC, slumped after it announced that the railways planned to appoint a regulator for the industry.

IRCTC’s market valuation reaching dizzying heights and comparable to that of Tesla, the American electric car maker, was invitation enough for the bear cartel to hammer the stock, market experts said.
Activity area . IRCTC was valued at around 300 times its earnings at Monday’s highest share price. Traders were driving up IRCTC’s share price anticipating that it enjoyed a nearly 100% monopoly on the booking and catering of Indian train tickets.

The IRCTC touched a low of ₹4,995 on BSE on Tuesday but closed slightly higher at ₹5,363 due to the average price formula for calculating the day’s closing price by the exchanges. Nearly 18 lakh of IRCTC shares were sold on open markets in the final minutes of Monday’s trading session, brokers said.

“This is the revenge of the bears. Stock markets have been on a relentless rally over the past few months and the bulls were carrying stocks like the IRCTC to levels unprecedented for any government company in India. Market insiders say that A few large wealthy traders have been building short positions in IRCTC over the past few days as the stock approached the market capitalization of Rs ₹ 1 lakh crore.

As soon as the IRCTC was placed in the derivatives ban segment by the NSE (National Stock Exchange), the sale in the spot segment led to a sharp collapse,” said a leading portfolio manager. in Mumbai.

NSE prohibits further positions in derivative counters where the market-wide position limit reaches 95% of total free float. The shares remain in the blackout period until the positions fall below the limits set by NSE and the positions are unwound. Sophisticated traders are known to take advantage of these rules and have managed to push the price in the desired direction when stocks are prohibited on derivatives, according to experts. Some top traders also use it as a strategy and wait for any action to enter the futures and options ban. IRCTC will come off the banned list from Tuesday. Experts say that if the IRCTC sees another sharp drop, it could also create a bad environment for the upcoming IPO of another government-promoted insurance giant, LIC.