'If you aren't diversified in India, you're a fool': Finfluencer warns retail investors as Polycab falls 20%

As share price of wire and cable maker Polycab India Ltd plunged over 20% on Thursday, finfluencer Akshat Shrivastava stressed on the need for a diversified stock portfolio for retail investors in India. The stock fell to a six-month low as Income Tax Department found unaccounted sales worth Rs 1,000 crore.

If losses hold, the stock is set for its worst day since March 2020, when coronavirus fears had gripped markets.

"If you are not a diversified investor in India, you are a fool, who is gambling your money. Consider for example: Polycab -- the stock is down roughly 20% today. The firm had no problem with sales/profit growth. So what's the reason:  discovery of 'unaccounted' cash sales," said Shrivastava on X platform (formerly Twitter).

I-T Department said on Wednesday it found the unaccounted sales during a search at a wire and cable maker in December. While the department did not name the company, a government source said it was referring to Polycab, reported Reuters on Thursday.

“Preliminary analysis suggests that the flagship company indulged in unaccounted cash sales, cash payments for unaccounted purchases, non-genuine transport and sub-contracting expenses… for suppression of its taxable income,” the department said in a statement. 

Shrivastava further said that there might be other businesses in India as well that might be doing unaccounted cash sales. He said the Polycab stock fall should be treated as a cautionary tale by Indian retail investors. 

"As a retail investor, you would be the last person to get to know all this. By that time you know and exit your positions, the game is already over. Warren Buffett can afford to make Apple, 50% of his entire stock portfolio. But, if you apply same strategy in India as a retail investor, ONE DAY you will be wiped out," he said.

At 1400 hours on Thursday, the scrip was trading 20% lower at Rs 3,937.85.

Research analyst Sandip Sabharwal said investors will be considered as 'ostriches' if they ignore the negative news surrounding the Polycab stock and explained why the charges against Polycab are graver than those against Hero MotoCorp.

"While investing you cannot be an Ostrich and bury your head in sand. Many don't want to believe the negative developments in #Polycab Few say there was a similar matter in #HeroMotocorp and stock shot up after that
Both are not comparable at all. There were no allegations on Hero of falsification of accounts. It was at the promoter level," Sabharwal said on X.