Santosh NairMoneycontrol.com
Deep pockets and access to inside information are definite advantages in the stock market game. And yet smart money—the experienced and well-informed investors—can as easily be caught on the wrong foot as other less-informed investors, by a turn of events they would have never imagined. Here are 8 stocks that caused heartburn to some of the reputed investors in 2013.
High networth individuals and fund managers holding Financial Technologies (FT) shares did not get time to react once the ‘payment crisis’ (which later turned out to be a well-planned scam) at group company National Spot Exchange became public. The slide from around Rs 700 in late July to around Rs 100 in early September, left many investors financially and psychologically scarred. Interestingly, some of the big local investors in FT were said to have been aware of the problems brewing at NSEL. Their confidence that the issue would be sorted out smoothly turned out to be their undoing. The fact that the stock had already fallen quite a bit from a high of Rs 1192 in January indicates that insiders would have started selling out much earlier.
The fraud at National Spot Exchange sparked a collapse in shares of MCX as well, though legally, the FT-promoted commodity bourse did not have any financial obligation to NSEL. From a peak of Rs 1499 at the start of the year, the stock crashed to a record low of Rs 238 by August. There was bad news on the earnings front as well, as Commodities Transaction Tax from July affected trading volumes on the bourse. The stock has doubled from lows in the hope that the promoters Jignesh Shah & Co will have to make way for a strategic investor.
Till March, the stock was making new highs, and a few HNIs were the envy of the street for having managed to get in early. Wockhardt was never a favourite with domestic fund managers, who felt the management was too stingy with information about the company. But the envy turned to glee when the USFDA issued an import alert on the company’s Waluj plant, sparking a sell-off in the stock from which it never really recovered. In October, the UK health regulator imposed restrictions on import of medicines made at the company’s unit at Kadaiya in Nani Daman for violation of norms. This was followed by a USFDA import alert on the company’s Chikalthana plant in Aurangabad. From its peak of Rs 2166 in March, the stock came crashing down to Rs 336 by December. Some of the well-known names on Dalal Street are said to have retired hurt from the stock after squaring off their positions at a loss.
The deal with Gulf-based Etihad Airways was supposed to trigger a re-rating of Jet Airways shares. But what market operators and other early birds in the Jet stock had not bargained for was the political and regulatory complications that would follow. At one point, it even looked that the deal would have to be called off. Smart money concluded it would be wiser to cut losses than hang on in the hope of a re-rating that may not happen at all. The stock crashed from a high of Rs 688 in April to around Rs 260 by December.
Daiichi Sankyo is still figuring out the landmines and booby traps it has had the misfortune to inherit. In May, the company coughed up USD 500 million to settle fraud charges. In June, the company’s Mohali unit was served a Form 483 by the USFDA. But that did not deter a group of market operators from loading up on the stock, convinced that they knew something that others didn't. To their dismay, the USFDA in September barred the company’s Mohali plant from importing drugs to the US sending the stock crashing from Rs 450 to below Rs 300. The stock has since recovered to around Rs 460, as operators are said to bought the stock afresh, hoping to make up for the previous losses.
Rumours of the bank of being merged with another large private bank have become something of an annual affair for the past many years, and the trend continued in 2013 as well. A Mumbai-based operator managed to whip a frenzy in the stock, convinced a few fund managers about the merger theory and got them to buy the stock, and in the process, managed to exit his position. The stock which rose to Rs 185 in early January, tumbled to Rs 70 by August. The stock has climbed to Rs 110, possibly as trapped investors are averaging their purchase price in the hope of selling out next year when the rumours resurface.
There is safety in numbers when the going is good, but it can be a handicap when everybody rushes for the exit at the same time. Shares of Yes Bank, a favourite with institutional investors, took a beating in July as the RBI’s measures to protect the rupee pushed up borrowing costs for banks which depended on wholesale funds. Yes Bank’s peers with a similar funding model too felt the heat, but what worked against Yes Bank was the board room battle playing out around the same time. From a peak of Rs 547 in May, the stock fell to Rs 216 by end August, and has now risen to Rs 370.
The government’s decision to increase diesel prices every month and benign crude prices at the beginning of the year had brokerages cheering the stock. The story found backers among fund managers and by mid-January, the stock had climbed to a 15-month high of Rs 380. But the rapid decline in the rupee between June and August soured sentiment for the stock, dragging it to a low of Rs 158. The stock has rallied nearly 50 percent since then, but is still a long way off the high for the calendar.
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