Negative news and breach of norms affects shares, Zee group latest example

Negative news flow impacts companies and their stocks adversely. This is the biggest learning transposed from the happenings of last year. Issues relating to auditor reports, exposure to virus-infected banks and NBFCs, poor management disclosures, promoter fiddles and, of course, pledged shares, where the companies are under the cosh due to a mountain of debt with weak cash flows, have seen relentless hammering on the exchanges.

Zee group is the latest in a long line of such instances where corporate governance and transparency norms have been breached and contravened. Sebi action on, say, a L&T buy back was another example while whistleblower complaints against say Sun Pharma saw the scrip Abeing debilitated.

Calendar year 2018 was a tough year for the markets. The benchmark indices saw the BSE Sensex gain 5.91 percent while NIFTY was up 3.15 percent. BSE MIDCAP and BSE SMALLCAP were sharply down at 13.38 percent and 23.53 percent respectively. Dow Jones too was down 6.39 percent. In such a year there were many stocks which got battered because of their perception and were virtually decimated losing between 57 percent and 93 percent in value.

DHFL or Dewan housing began the NBFC crisis when issues about the company being unable to service its commercial paper began doing the rounds. ILFS Transportation and ILFS Engineering were two of the listed entities of the beleaguered IL&FS group which defaulted on many of its loans. Issues about the company and loans of promoter entities cause this market place company Infibeam to just collapse. Manpasand Beverages ran into issues about inflated sales and therefore receivables and was massacred.

P C Jewellers was linked with Vakrangee Limited and issues about promoter shareholding being disposed of without information surfaced. Also, the company was suspected of booking gold sales as jewellery. Shankara Building Products was billed as India's Home Depot. Unfortunately it transpired that the company is a steel shop convertor and nothing more. The share trades below its issue price after touching a high of Rs 2365.

Sun Pharma has been in the news ever since it acquired Ranbaxy. Issues about inspection and a complaint from a whistle-blower about impropriety about the promoter's brother in law forced a conference call and clearing of issues. Fortunately being a company of standing, it never got battered in the manner of others and lost just about 25 percent.

Vakrangee Limited was suspected of showing gold trading as turnover. Further the revenue from Seva Kendras was over inflated. Various regulatory issues and investing in shares of P C Jewellers did the company. Announcement of a buyback which was then cancelled did not help matters.