Bodal Chemicals @ Rs 35 ~ Shocked at the advice of a Broking House promoted by a Private Bank

Bodal Chemicals @ Rs 35 ~ Shocked at the initial ‘Buy’ advice and inside a month ‘Sell’ advice of a Broking House promoted by a Private Bank

I normally never comment in print or otherwise on the recommendations of others whether I agree or disagree with them ….each to his own counsel….but there are exceptions when clients ask me for an opinion or in scenarios like this below where a wider populace of those investing in equities are impacted…nothing personal  

On September 18,2014 the Institutional Desk of a leading Broking House promoted by a leading private bank came out with a Research Report on the Chemical Industry and called ‘Bodal Chemicals ‘ a Turnaround Turk @ Rs 53

Just @ 20 days later and @ Rs 20 down @ Rs 36  on October 9,2014 the Retail Desk of the same Broking House advised their Risk  Averse Clients to exit ! and Long term Clients to average if it drops further into the Rs 26 to Rs 28 range and there was a chance it will !

The Analysts are different in both the reports

Phew ! Sympathise with the Clients of this Broking House !

Those who bought Bodal Chemical in the Rs 50 to Rs 60 range  have lost @ 28% to 40 % inside  20 days ! while this Broking House, while making the Brokerage on the deals ,has not even apologised for the idea and the probability that they were suckered by the management and Promoters! 

What is shocking really is not this ill advice…it happens to the best of us…. but what is revealing is one of the reasons they have given to exit now at this huge loss  inside days !

It’s because from September 18,2014 one NRI Promoter and his wife have been selling the Stock !

The same day as the Research Report was released !

Did the analysts  of this Broking House who recommended a ‘Buy’ for ‘Bodal’ meet the Management or Promoters of Bodal Chemicals ?…and if they did ,have they unwittingly become the conduit to recommend to clients of their Employer so there is huge buying and it facilitates the offloading by the Promoter Jayanti Patel and his wife ! ?…or is there something more than meets the Eye here !

The Broking House would have not lost as much credibility as it has now if it had simply apologised for this and recommended all clients to exit and not just the risk averse clients…and with this scenario of a Promoter selling heavily from the release date of the report how can you recommend that clients can consider averaging at lower levels !?….that may be putting more good money after bad ! …would one want to increase exposure in such a company !? and therefore it’s weightage in one’s equity portfolio !?….more so if one observes the 52 Week High & Low is Rs 75 on August 6,2014 and Rs 8.20 on October 24,2013…it’s been dropping from August 6,2014 after having risen dramatically from October 24,2013  

Is there any Nexus between the Promoters and the Analysts or this Broking House ?

There were 16395 Non Promoter equity shareholders at September 30,2014 => 4422  more than the 11973 at June 30,2014

Promoters Holding has gone down from 72.32 % to 70.92% in the same period with both, NRI Jayanti D Patel and his wife Shakuntala J Patel reducing their holdings  with the former selling 1090680 shares and the latter selling 435000 shares aggregating 15.25 lakh shares

…it’s seems like nothing short of a fraud played out on the new unsuspecting equity investors who bought in on this recommendation of this Broking House…the Broking House facilitated the part exit by this Promoter and his wife

Whether wittingly or unwittingly…I don’t know…but I’m entitled to take an educated guess !  

..and if it was it would neither be the first nor the last time such a insider and manipulative scenario has played out in our Equity Markets

…and think again if you think our Exchanges or the Regulator will investigate this to get to the bottom of it so that small and retail investors retain whatever faith they have in our markets !

This is the Trading Pattern for 17 trading days on BSE from September 15,2014 to October 20,2014

Observe in the 14 Trading Days since the Broking House Report on September 18,2014 the Share Price has been continuously dropping and in fact as highlighted in Bold Red on four trading days it remained the full day on the lower circuit with only sellers and few buyers

Look at the High abnormal Trading Volumes on September 18,2014 (10.28 lakh shares) when the Chemical Industry Report was released and on October 9,2014 (9 lakh shares) when the Sell Advice Report was released…both are highlighted in Bold Maroon

Extraordinary Volume of 15.90 lakh took place even on September 29,2014 as highlighted in Bold Black though Delivery % was very low at 24%…On October 1,2014 the Volume exceeded 6 lakh shares