71% stocks on BSE trading at record lows

Though both the benchmark indices, the sensex and the nifty, have not broken their January 22 lows, the common investors have seen enormous wealth erosion, before the recovery set in on Thursday.

Taking cues from global peers, markets have witnessed buying in large-caps as well as mid-cap stocks in the last two days when the benchmark sensex rose by over 1,131 points while the nifty shot up 363 points.

After the big correction of January 22, which dealt a severe blow to stock prices of many companies, as many as 1,956 stocks out of the total 2,764 traded on a given day, have continued to bleed and touched new lows the last five trading sessions.

These constitute 71 per cent of the total stocks listed on the BSE. However, midcap and smallcap counters also showed some recovery due to buyers interest.

Also, it is not only the second-rung stocks but also 12% of the Nifty and 9% of the derivatives stocks that made a new low after January 22, in the last five trading sessions.

"The reason for this investor wealth erosion is not only Reliance Power debacle, as many may perceive, but the fact that leveraged positions were getting unwound in the cash stocks in the last five trading sessions," said V K Sharma, research head, Anagram Securities.

Retail investors could not sell off their holdings in these stocks as majority of them had triggered lower circuit filters.

Leveraged positions in the derivatives got settled quickly, as these stocks have no individual limits and they could fall as much as was required, barring of course the time when the sensex hit the circuit breaker.

Most of the selling that happened by January 22, when the sensex hit the circuit, was sorted out by January 28, the settlement day.

But the leveraged positions in the cash stocks remained to be squared up as these stocks were continuously on the lower circuit.

Thousands of stocks have remained in the lower circuit for days together because of the limit of 5 per cent that a stock can fall.