Mid-cap stocks plummet on FII selling

Merrill Lynch, Citigroup, Morgan Stanley offload major holdings

Mid-cap companies saw heavy selling during the last fortnight with prominent foreign institutional investors being the major sellers. Bear Stearns arm BSMA Ltd itself offloaded securities worth more than Rs 2,000 crore from the mid-cap Indian companies last fortnight, most of which belong in the BSE-500 index.

The BSE Mid-cap index has declined by around 14.7 per cent as on Monday, March 24, 2008 as compared with March 7, 2008; the Sensex has gone down by only 4.5 per cent during the same period.

(The BSE Small-Cap index too has fallen by a whopping 17.35 per cent during the above period.)

It is not only the FII arm of the fifth largest US Securities firm Bear Stearns that has been dumping the mid-cap companies but prominent FIIs such as Merrill Lynch, Citigroup, Credit Suisse, and Morgan Stanley have sold heavily in some of the mid-cap companies. BSMA, Bear Stearns' FII arm, sold shares in ABC Bearings, Exide Industries, ICSA Ltd, Jupiter Bios, Lakshmi Overseas, Man Industries, Spice Jet, Sujana Tower, Swan Mills, Kalyani Steerings, Stone India, and Silverline Technologies among others over the last two weeks. It sold shares worth more than Rs 2,000 crore.

Goldman Sachs, Lehman Brothers, Macquarie Bank and HSBC Financial Services Middle East too have offloaded shares in bulk deals in some mid-sized companies during the past two weeks.

Top US investment banking firm Merrill Lynch, which was among the first to announce write downs as sub-prime related losses, has pulled out from Indiabulls Real Estate (15.15 lakh shares at Rs 495.05), Jain Irrigation (22.86 lakh shares at Rs 634), Jai Corp Ltd (26.57 lakh shares at Rs 660), and Arshiya International through bulk deals that it reported between March 11 and March 18. Morgan Stanley also sold off IPCA Lab Ltd shares.

Citigroup

Citigroup has offloaded 25 lakh shares of Ruchi Soya, which was bought by Reliance Mutual Fund's new scheme Reliance Natural Resources Fund at Rs 87.50 per shares. Citi also sold off a large number of shares of Country Club at Rs 624.60, while Morgan Stanley offloaded 82,901 shares of Country Club at Rs 600. (Both these bulk deals were reported on March 10).
Credit Suisse sold shares in bulk deals in Gammon India, Simplex Infrastructure and GVK Power and Infrastructure.
Deutsche Securities has sold off in Bang Overseas shares in two big lots reported on March 10 and March 11.
Housing Development and Infrastructure Ltd shares numbering more than 38.85 lakhs were sold by Goldman Sachs at Rs 631.5 as reported on March 13. Lehman Brothers has sold Voltamp Transformers shares, while Macquarie Bank sold off shares of Orchid Chemicals following the company's reported exposure to foreign exchange derivatives in the overseas market.

HSBC Financial Services Middle East offloaded 2.92 lakh shares of Gruh Finance at Rs 137.50. FIIs have offloaded about $3.5 billion worth of shares from the Indian market since January 2008 so far. During March so far, they have offloaded $662 million, according to SEBI data.

Ravi Ranjan Prasad Mumbai, March 24