Mumbai: About a dozen mid-cap and small-cap shares crashed on Monday with a plunge of up to 62 percent, prompting market regulator Sebi to initiate a probe into panic selling triggered by speculation that pledged shares are being sold by certain entities.
Sebi, along with the bourses which act as front-line regulators, are looking into possible links of a rogue trader who has been barred from the capital markets but could still be trading through front entities, a senior official said.
Suspecting foul play, the authorities got into the act immediately after a massive sell-off was witnessed around the noon time in shares of over a dozen companies.
While the problems were initially limited to about 10-12 stocks, the panic selling spread to other companies from the sectors of affected stocks, the official said.
However, some of the affected shares managed to recover the lost ground, fully or partly, in the afternoon trade.
Sources said that most of these firms have a significant amount of pledged promoter shares and there are indications about margin-calls being triggered on these counters.
There is also a suspicion that deliberate attempts could have been made to pull down the shares through spread of wrong rumours among the traders about these stocks, the official said, while adding that the exact position would be known only after further investigations.
According to data available with the stock exchanges, shares of Core Projects tumbled 62 percent and was the biggest loser on the entire BSE, while scrips of Aanjaneya Lifecare, Sudar Inds, Flexituff, ABG Shipyard, Welcorp and Gemini Comm crashed by 20 percent each.
BSE Mid Cap index declined 1.20 percent to close at 6,529.53 points while BSE Small Cap shed 1.36 percent to end the day at 6,475.65 points. The benchmark 30-share Sensex ended flat at 19,331.69 points.
Among other major losers, shares of Orbit Corp declined 12 percent while that of Opto Circuits fell 10 percent.
The crash in mid-cap and small-cap shares could have been triggered by huge sell orders placed by certain connected entities and the matter was being probed. This is the second instance in less than a year when a large number of mid-cap stocks have been hammered amid manipulative activities.
In August 2012, Sebi had barred 19 entities from the securities market after an initial probe into share price plunge in some mid-cap stocks, including Parsvnath, Tulip Telecom and Pipavav Defence.
Last year's move followed a sharp plunge of 20-26 percent in the shares of Parsvnath Developers, Pipavav Defence and Offshore Engineering, Tulip Telecom and Glodyne Technoserve on July 26 at the BSE and the NSE.