Midcap companies have recently seen extreme selloffs and it only intensified on Wednesday with rumours of promoters of some of these companies edging towards bankruptcy. Prithvi Haldea, CMD of Prime Database believes this kind of a phenomenon may be linked to promoter pledges.
"I presume that there is definitely some insider information, some insider positions which have been taken and there is therefore, a selloff which is taking place. But, it is very difficult to take a call right now as to why these specific stocks that you just mentioned are losing so much of value overnight," he explained.
According to Haldea, there is a need to improve investigations on insider trading and investors need to be wary of illiquid stocks in the market.
Besides, Haldea thinks Securities and Transaction Tax (STT) is unlikely to be done away with in FY14 Budget. However, there are chances of it being reduced on delivery based trades. He also expects significant changes in the Rajiv Gandhi Equity Savings Scheme (RGESS) during the upcoming Budget. It may be used to channelize household savings into equity, opined Haldea. Moreover, RGESS can be linked to public sector divestments to attract retail investors, he added.
Haldea is also of the view that the mutual fund industry needs restructuring to attract retail investors. He also advocates the requirement for government support for SEBI moves on IPO safety nets.
Here is the edited transcript of the interview on CNBC-TV18.
Q: What are your thoughts on this extreme selloff which is happening in many of these midcap companies, around 50 to 60 percent a day? What do you think is going on? Even Securities and Exchange Board of India (SEBI) is trying to look into it but, what is your sense of what might be happening?
A: It is very difficult to say from the outside because you are talking of very specific stocks where huge falls have taken place. However, I presume that there is definitely some insider information, some insider positions which have been taken and there is therefore, a selloff which is taking place.
But, it is very difficult to take a call right now as to why these specific stocks that you just mentioned are losing so much of value overnight.
Q: Someone earlier was pointing out that there could be a liquidity choke up on some of these companies but would you say that it is impossible for a stock to fall in this 60-40 percent quantum without there being some kind of promoter relationship to the fall?
A: That is the exact point that I mentioned. There has to be some insider related development. It cannot be based upon small or big news. These kind of falls are generated typically by operators or promoters in consent.