This TVS group company's shares crashed 20% today amid heavy volumes. Here's why

Shares of Sundaram-Clayton Ltd slumped in Friday's trade amid heavy volumes. The stock cracked 20 per cent to hit a day low -- also its lower price band -- of Rs 3,858.80 over its previous close of Rs 4,823.45. The sharp movement in the share price comes ahead of bonus share issuance to eligible shareholders. Sundaram-Clayton is a part of TVS Group engaged in auto components manufacturing and distribution. It is a supplier of aluminium die castings to the automotive and non-automotive sectors. Currently, the company is in the process to reorganise and segregate its businesses.

The company fixed March 24, 2023, as the record date to determine eligible shareholders who will be entitled to receive bonus 'Non-Convertible Redeemable Preference Shares' (NCRPS) of the company in the 1:116 ratio.

"Accordingly, each equity shareholder of the company, as on the record date, will be allotted 116 fully paid up NCRPS having a face value of Rs 10 each of the company," it stated in an exchange filing.

Aamar Deo Singh, Head Advisory at Angel One, "Sundaram Clayton witnessed a massive price correction ahead of its record date to determine eligible shareholders entitled to receive bonus NCRPS of the company in the ratio of 1:116."

Around 14,000 shares changed hands today on BSE, which was more than 20 times compared to the two-week average volume of 658 shares. Turnover on the counter stood at Rs 5.45 crore, commanding a market capitalisation (m-cap) of Rs 7,807.16 crore.

At today's low price of Rs 3,858.80, the stock traded 33.46 per cent lower from its 52-week high level of Rs 5,799.30, hit on November 15, 2022. That said, the counter has climbed 10.25 per cent from its one-year low level of Rs 3,500, touched on May 16 last year.

On the technical front, Angel One's Singh said, "The stock has been in a downtrend for the past many weeks, with bears having an upper hand. The stock is currently trading around the Rs 3,800 mark, with a crucial support zone seen around the Rs 3,400-3,500 mark. On the upside, the stock has resistance around the Rs 4,300-4,500 zone," stated.

Jigar S Patel, Senior Manager - Technical Research Analyst at Anand Rathi Shares and Stock Brokers, said, "At the current juncture, the stock is trading below daily and weekly alligator which is a matter of concern. A further downside the to Rs 3,600 level could be possible. We may see base creation near Rs 3,600-3,650 in the coming few weeks. As of now, no fresh longs are advised."

AR Ramachandran from Tips2trades said, "Sundaram-Clayton is bearish on the daily charts and a close below the support of Rs 3,950 could lead to Rs 3,700. Resistance will be at Rs 4,538."

The stock was last seen trading lower than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 18.88. 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 11.70.

Sundaram-Clayton has a one-year beta of 0.40, indicating low volatility.

On the earnings front, Sundaram-Clayton's standalone net profit for the quarter that ended December 2022 (Q3 FY23) more than doubled to Rs 34.18 crore against a year ago period. During the quarter under review, revenue from operations rose to Rs 503.49 crore from Rs 426.99 crore.

Meanwhile, Indian equity benchmarks slipped into the red in late-morning deals, dragged by financials, state-owned lenders, metals and energy stocks.

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