Dalal Street operators caught in bear hug

Retail investors and traders are not the only ones who burnt their fingers in the recent market fall. The bear hug has rattled some large stock market operators and they've been scurrying to square off their positions in the past couple of weeks.

Stocks associated with various operators have plunged in recent days amid the sell-off in the broad market, which resulted in the Bombay Stock Exchange's mid-cap index slipping below the 200-day moving average at 6,480, a bearish sign.

CORE Education, Welspun Corp and ABG Shipyard, whose past movements have been linked to an operator banned by the market regulator, were at the receiving end yesterday. Today, it was the turn of shares whose activity is associated with a known Ahmedabad-based operator. Aqua Logistics, Gravita India, PG Electroplast, Sudar Industries and Onelife Capital were among those which plunged 20 per cent. The sudden dive in all these happened around the same time -" between 10:45 and 11 am.

Brokers whom Business Standard spoke to could not assign a 'fundamental' reason for the fall in these stocks. One theory doing the rounds is that brokers and financers have been forcing many of these operators to square off their positions on fears of the sell-off spreading.

"Every financer is forcing operators to wind up their positions. Nobody wants to take a risk," said a veteran broker. "When a financer asks the operators to sell, it is not just in one stock, it's across the board. That's the reason we have seen all stocks belonging to operators crashing."

Market sources said selling forced by one financer prompted many others to follow. As a result, many other operators, including a Mumbai-based one who's known for bearish bets, have been unwinding in recent weeks. It is speculated that another operator, known for his sizable bets on frontline shares, has put his land in a western suburb here on the block, though it is not clear whether this has been driven by losses.

"People with large stock holdings where valuations are never justified by the current market price have been under pressure. This is because brokerages, where the positions were held, have been unhappy about the market fall," said Arun Kejriwal, chief executive of KRIS, an investment consultancy.

The market buzz is that some of these operators might have willfully cut their positions ahead of the Budget to avoid being caught on the wrong foot. They fear a sharp slide in the market on Budget day if the event disappoints. It could result in such trades coming under the regulatory radar.