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Friday, April 13, 2012

What’s cooking in Varun Industries?

Varun industries, a diversified company with its footprints in mines & minerals, oil & natural gas, stainless steel wares, wind power etc., saw its share down by around 77 % in just 34 trading days with 11 consecutive lower circuits.

Though analysts are attributing margin calls getting triggered for such a debacle but speculation is rife in the market that books were cooked and mineral potential of the company was overstated.
The website claimed that company was growing at the CAGR of about 30% (profit CAGR too was around 20 % as per the books of the company) this figure is difficult to digest as the same was not reflecting in profit margins.
On last two trading days there was no lower circuit and a few broking and asset management companies are trading in bulk to hold the price to ensure exit.

What is important to note that these companies are selling more than what they are buying, this clearly indicates that this is nothing but an attempt of price-holding to get best-possible exit.
Last two trading days observes exceptionally high 6-month volume. Retail investors should stay away from this stock and should not get tempted by a rally which might occur as a dead cat’s bounce or artificial price propping.


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