SME stocks took a beating on Thursday, with 43 of SME IPO index constituents falling against 13 that ended higher after the market regulator SEBI asked stock investors to be careful and watchful of practices by some of the SME companies and their promoters, post listing.
SEBI said some of the listed companies are projecting an unrealistic picture of their operations, with promoters making public announcements that create a positive picture of their operations, typically followed up with corporate actions such as bonus issues, stock splits and preferential allotments.
VVIP Infratech Ltd shares plummeted 6.54 per cent to Rs 269.50. This SME stock got listed on July 30. Kizi Apparels Ltd plunged 6.12 per cent to Rs 37.75. BSE has sought clarification from Kizi Apparels Ltd, with reference to stock price movement. The scrip is up 57 per cent in the past five sessions. Aelea Commodities Ltd tanked 6.02 per cent to Rs 203. Bondada Engineering Ltd was locked at its 5 per cent lower circuit limit. This stock would split into shares with face value of Rs 2 each against Rs 10 at present on September 2.
Afcom Holdings Ltd fell 5 per cent. The company said there has not been an occurrence of any material event as defined under Regulation 30 (LODR) pertaining to the movement in volume of the company's shares traded in the exchange. This scrip was up 97 per cent in the past one month. Sunita Tools Ltd declined 5 per cent to Rs 645.10. This company on Wednesday won orders to the tune of Rs 37.
Finelistings Technologies Ltd also fell 5 per cent. BSE has sought clarification from Finelistings Technologies with reference to significant movement in price, in order to ensure that investors have latest relevant information about the company and to inform the market so that the interest of the investors is safeguarded. The stock is up 44 per cent in the past one month.
"SEBI’s advisory to investors to be vigilant in investment in SME stocks is timely. Investors should heed the warning from the regulator that many SMEs are “projecting an unrealistic picture of their operations,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
The BSE SME IPO index settled the day 4,019.40 points, or 3.60 per cent, at 1,07,664.22. Against this, the BSE Sensex closed at 82,134.61, up 349.05 points, or 0.43 per cent.
"The largecap segment is safe without euphoria. But the SME segment is certainly in risky euphoric territory," he said.
Vaibhav Porwal, Co-founder at Dezerv said risks like market corrections and regulatory interventions could temper the frenzy in the market. Investors should exercise caution and focus on fundamentals, as the SME stocks could correct sharply if sentiment shifts, Porwal said.
"SME stocks can be highly volatile post-listing, with prices that may not sustain the initial surge. An extreme demand may signal market overexuberance, often leading to sharp corrections. Investors should approach SME IPO with caution, checking promoters businesses fundamentals considering the speculative nature and potential volatility in the SME market," said Narinder Wadhwa, Managing Director of SKI Capital.