From the day’s high, which was also the stock’s record high, the scrip crashed 22 per cent and effectively entered a bear market. A technical bear market is defined as a 20 per cent fall from the recent high of security.
The reason for such a sharp turnaround in sentiment was not newsflow but a rapid adjustment in positioning among speculators.
The market-wide position limit on the October futures of IRCTC most likely crossed the 95 per cent threshold. NSE is mandated to put any stock where the MWPL crosses 95 per cent under a temporary F&O ban till the positions in the contract come below the 80 per cent mark.
For speculators who had been taking long positions, a ban is bad news as they will end up giving up a lot of their paper profits because traders will only be allowed to liquidate existing positions and not take new positions. Since most positions in IRCTC were bullish, this would mean that if the stock enters an F&O ban, it would see liquidation of those positions that will cause the stock price to fall.
As animal instincts demand, traders in order to protect their profits press the sell button as if they were trying to save the world. Today’s fall in IRCTC also proved that the entire rise from Rs 1,500 to Rs 6,396 was just fuelled by speculation with not much of fundamentals to back it up.
HUL’s comments sting hard
From the market’s initial reaction to Hindustan Unilever, one could gauge that investors were unfazed by the muted earnings performance for the September quarter. After all, the stock surged to the day’s high. However, all that optimism was for naught as more data came trickling out.
Turned out, HUL’s volume growth in the September quarter was underwhelming, to say the least, and its margins shrank considerably despite a 7 per cent price hike in a broad portfolio. However, what turned investors negative was the management’s comment that gross margins are going down even more and that it is seeing signs of moderation in rural demand.
Given the stock was trading close to record highs ahead of the earnings, HUL’s less-than-pleasing commentary was enough for some investors to seek the exit door today.
ITC’s bad luck strikes back
Ah, ITC! Thou luck is worse than Sisyphus’. Shares of the country’s largest cigarette maker sank over 6 per cent after the old nemesis came back to bite the company. Media reports said that the health ministry has formed a new panel to look into taxes on tobacco products. From past experiences, investors know that it is the worst possible news for the company.
The panel is expected to recommend steps that will make India compliant with WHO’s MPOWER package that aims to raise taxes on tobacco products as an effective means to tackle cigarette addiction. That’s bad news for ITC because analysts now fear those tax hikes could come as soon as the next Union Budget.
Nothing fazes this Jhunjhunwala bet
Nazara Technologies is in that universe today where its investors are unperturbed by any bad news. Shares of the company were locked again in their 5 per cent upper circuit limit even as media reports said that the GST Council is likely to mull a single rate of 28 per cent on online gaming.
Currently, online gaming is charged a rate of 18 per cent or 28 per cent depending on if the game is a game of skill or chance. However, this has led to certain overlapping in taxation and unfair advantages for the companies. According to reports, the government now wants to charge a single rate and that too at the highest bracket.
Specialty Restaurants soars
The decision by the Maharashtra government to allow restaurants and eateries to remain open till midnight is a major shot in the arm for Specialty restaurants, which run brands like Mainland China and Oh! Calcutta in the city.
The increased hours coupled with increased demand from people due to the reopening of the economy and higher vaccination rate is likely to boost revenues of the company in the December quarter. No surprise then that the company’s stock ended 15 per cent higher despite a weak market.
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