Mumbai: In August, even as a key index of the Bombay Stock Exchange (BSE) declined and foreign investors exited equities, some small-cap stocks (or stocks of low value) bucked the trend.
More than 20 such stocks hit their 52-week highs, even as fund managers sold blue chips .
NIIT Ltd was the top loser among BSE’s top 500 firms in terms of market capitalization—its shares fell 89% in the last 23 trading sessions.
Among the top gainers is Bio Green Industries Ltd, whose shares have risen as much as 191% in a month and touched their 52-week high. The company has zero foreign insitutional investor (FII) holdings and its main business is extracting oil from seeds.
The Sensex, the benchmark index of BSE, has lost 1,444 points between 24 July, when it touched its lifetime high (of 15,869, in intra-day trades) and 24 August, when it closed at 14,425. FIIs were net sellers of Indian equities worth Rs12,969 crore this month till 23 August, according to the BSE website.
Low-value stocks, especially ones that trade at under Rs10 a share, are usually held and mostly traded by speculators who hold the stocks for a short period of time. However, some of the low-value scrips have moved because of positive news, say brokers.
In the case of Bio Green, this news has to do with the company retiring debt. “We recently made a preferential equity allotment to some private investors, including the owner of Sundaram Multi Pap Ltd, and the funds were used to clear our loans with State Bank of India and Industrial Development Bank of India. Today, we are a zero-debt company,” said Rajesh Jayan, head of accounts at Bio-Green.
Sundaram Multi Pap Ltd, listed on BSE, is a major manufacturer of stationery.
Bio Green had appointed consulting firm First Call India Equity Advisors Pvt. Ltd, which also holds about 15% equity stake in it, as an external advisor. Among other key shareholders in Bio Green are the Shiv Sena’s executive president Uddhav Thackeray and his wife Rashmi Thackeray. The Shiv Sena is one of the most influential political parties in Mumbai.
“Bio Green acquired a paper mill facility that has a manufacturing capacity of about 80 tonnes per day. Also, it owns 50 acres of land in Visakhapatnam. About 30 acres of this land is now being developed to farm oil seeds,” said V.V.L.N. Shastri, the country head of First Call India Equity Advisors, explaining Bio Green’s rally.
While punters (speculators) in the market are playing up a vast majority of these small stocks, few have climbed up on pure fundamentals, said Darshan Doshi, a Mumbai-based equity broker.
“Kushagra Software Ltd holds over 10% stake in Geodesic Information Services Ltd. The latter had very recently announced an attractive bonus share offer,” Doshi added, referring to another low-value stock that has done well. Shares of Kushagra have risen 110% to Rs4.02 in the last month.
The BSE Small Cap index, an index of low-value stocks, closed at 7522 on Friday, down from a 52-week high of 8354.6 reached on 17 July.