Kolkata: Share prices and trading volumes of some state-run firms have risen sharply after the government announced last week that it would sell at least 10% of the equity to the public in all listed companies it owns.
On Tuesday, over 1.8 million shares of miner NMDC Ltd were traded on the Bombay Stock Exchange (BSE), which was at least six times the stock’s average daily trading volume in the past two weeks. The stock closed at Rs433.70, 20% higher than Monday, even as the benchmark Sensex index lost 58 points to close at 16,440.56 points.
Similarly, in MMTC Ltd, India’s biggest state-owned trading company in which the public holding is as little as 334,400 shares, or 0.67% of its equity capital, the trading volume has risen three times from its two-week average of 2,250 a day to almost 6,400 on Tuesday.
Graphics: Ahmed Raza Khan / Mint
The scrip, one of the most expensive stocks in the country, closed on Tuesday at Rs38,019, 4.63% higher than Monday.
Trading volume in Hindustan Copper Ltd, in which the government owns a 99.6% stake, rose by at least four times the average daily trading levels in the past two weeks. On Tuesday, the stock closed at Rs280.60, gaining 5.8% from Monday.
Stocks of these companies that also include State Trading Corp. of India Ltd (STC), Scooters India Ltd, fertilizer and chemicals firm FACT Ltd and machine tools maker HMT Ltd, in which the government holds not less than 90% equity, are typically thinly traded as there aren’t too many shares available in the market.
But investors are now snapping up these shares in the hope that prices will rise in these public sector enterprises, even though home minister P. Chidambaram has not specified any deadline for the sale, only saying that it will be done “at an appropriate time when the market is favourable”.
Since the government’s announcement on 5 November, the Scooters India stock has gained the maximum at 62.95% in four trading sessions, followed by NMDC (47.52%), HMT (35.44%), Hindustan Copper (32.42%), STC (29.6%), FACT (28.91%) and MMTC (26.54%).
People expect increase in liquidity of these stocks will lead to better price discovery, said Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services Ltd.
According to Rajesh Agarwal, director of CD Equisearch Pvt. Ltd, a Kolkata-based brokerage firm, there is also some speculative interest, which is evident from the low delivery volumes in some of these stocks.
For instance, only 20% of the 1.8 million shares of NMDC that were traded on BSE on Tuesday would be delivered to new owners.
“The rest of the volume came from day traders, who bought the stock in the morning and sold before trading ended,” Agarwal said.
The delivery volume was less than 60% in almost all these stocks. It was as low as 14.5% in the shares of HMT. The stock gained 18% to close at Rs76.25 on Tuesday.
Till there’s clarity on the timeframe for the sale, the speculative interest in the stocks would continue, said Sarabjit Kour Nangra, vice-president (research) at Angel Broking Ltd.
Some investors have been accumulating shares of Hindustan Copper, said chairman and managing director Shakeel Ahmed. One investor holds some 51,000 shares of the firm, he said. “He is the third largest shareholder in the company after the Union government and two financial institutions.”
Hindustan Copper has one of the highest public holdings among all these firms, with some 11,800 retail shareholders owning 3.78 million shares.