SEBI needs to probe recent mayhem in mid-cap stocks: Udayan

Udayan Mukherjee, managing editor, CNBC TV 18 says that Securities and Exchange Board of India needs to look in to the recent mayhem in mid-cap stocks. He stressed that regulator owes some answers to people because of the kind of damage that it has caused in this mid-cap stocks. It is unusual to see the stocks halving in one day.

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Sharp fall in mid-cap stocks has been on just not today, but for the last many sessions. Something is going on. It is not yet clear whether it is operators going burst or promoters also going burst,  defaults in margin funding payments or both of them in collusion have done some deals and are now trying to come unstuck. A combination of all of this might be at place.
The regulator needs to look into it. Maybe people have not done anything wrong, but maybe they have put the system at risk because of the kind of leverage or extension they put themselves to. It is ridiculous. So, more than the market we are still at 5,700, the world is not ended and we are just 6-7 percent away from the peak that we have reached a few days back. So for the Nifty we are still okay.
One major fear is that because of the events of the last many weeks, lot of observers on India might be asking themselves questions on growth. Because all through FY12 what happened is we had lots of capital inflows and India got rerated. However, there was no earnings growth. Our price earning (PE) multiple expanded a lot because of the feeling that our growth is just not there.For four quarters, we have been hoping that growth is picking up but growth has still not picked up. The investment cycle is just not picking up and the FM did not do any great service either in the Budget 2013-14. So because of those factors people will say, 'why should we pay 15 times for India with this kind of growth? May be we need to pay 13 times.'
Could India get derated over the next couple of quarters because growth has not come through? That is a genuine fear that you might have. Nobody writes off India, but the price point may change and that price point change might mean derating in the near term, till we can see evidence of growth picking up. So that is a possibility because of the rerating that we saw throughout 2012.