RailTel Corp shares crash 20% as small-cap counters bleed

RailTel Corporation of India Ltd shares fell sharply in Wednesday's trading session amid heavy selling in small-cap stocks. The stock slumped 20 per cent to hit its lower price band of Rs 308.40. The counter saw heaving trading volumes today on BSE. Around 12.55 lakh shares were last seen changing hands compared to a two-week average volume of 3.51 lakh shares.

Small and mid-cap stocks faced a bumpy ride due to Sebi's vigorous crackdown on over-speculation, prioritising the safeguarding of market participants' interests, said Rupak De, Senior Technical Analyst at LKP Securities. Both broader indices slipped below their recent consolidation levels, sparking increased bearishness among investors, he added.

There would be sustained weakness in the broader market, particularly in the small-cap segment, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"The excessive valuations in these segments driven by the irrational exuberance of retail investors has been a concern for many months now. But, it has taken the strong message from the regulator Sebi to trigger a correction in the Nifty Smallcap index by 10 per cent from the February 8th's peak. It is important to understand that 396 stocks are in the lower circuit indicating that there is more pain to come in this segment. Actions from mutual funds also indicate the excessive valuations in the broader market," Vijayakumar stated.

"Mid- and small-cap indices have rallied 35 per cent since October 2023. Intermediate corrections to the tune of average 12 per cent in mid and small caps have been a bull market norm. At present 8 per cent correction is behind us," ICICI Securities said.

RailTel's counter was trading lower than the 5-day, 10-, 20-, 30-, 50-day and 100-day simple moving averages (SMAs) but higher than the 150-day and 200-day SMAs. The stock's 14-day relative strength index (RSI) came at 9.22. A level below 30 is defined as oversold while a value above 70 is considered overbought.

The company's stock has a price-to-equity (P/E) ratio of 50.85 against a price-to-book (P/B) value of 14.12. Earnings per share (EPS) stood at 7.58 with a return on equity of 14.12.

RailTel Corp, a Mini Ratna (Category-1) PSU, is an information and communications technology (ICT) provider and one of the largest neutral telecom infrastructure providers in the country with a pan-India optic fiber network. As of December 2023, the government holds a 72.84 per cent stake in the company.