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Three reasons why midcap stocks have crashed

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Mid- and small-sized stocks slumped on Monday, with Core Education and Technologies losing over half of their market cap in a few hours. Welded steel pipe maker Welspun Corp declined as much as 30 per cent. Shipbuilder ABG Shipyard fell 20 per cent while Videocon shares traded 12 per cent lower.
Here are the possible reasons behind the selloff
  1. Pledged shares: There is speculation that pledged shares in some of these companies are being sold off, dealers said. 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.
  2. Lack of buying by foreign or domestic institutional investors at support levels have sent these stocks in a free fall, traders said.
  3. Traders are wary of taking large positions ahead of the Budget.

 

(With inputs from Reuters)



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