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Stocks

Amtek Auto Follows The Castex Way With No Circuit Support – Crashes Over 60%

We’ve spoken about Castex, which used to be Amtek India. It continues to fall to the circuit limit every day since it hit Rs. 360 a share, and is now at Rs. 86 per share and shows no sign of even trading a few shares.

The parent of that company is Amtek Auto. This company too has been hammered, and has no “circuit” protection because it’s in the Futures and Options category. It has fallen from Rs. 175 in July to Rs. 63.6 today, a 63% fall!

Here’s a daily chart:

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And a weekly chart:

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It’s back to the levels it was at in 2014 January.

Why the Fall?

There are way too many reasons.

  • The company has been taken off the F&O list – so there will be no further futures or options contracts after October. This stock has seen huge interest in options and futures with the number of contracts reaching market wide position limits very often. Perhaps disappointed players are unwinding their positions? The story is likely to be more racy, with a slew of participants that might be using the position limits to limit the amount that the stock can be shorted, which creates a short squeeze and pushed the stock price up.
  • CARE ratings have even suspended Amtek Auto on August 7, stating that the company hadn’t provided information.
  • They’re losing money. They reported a loss of more than Rs. 150 cr. in the June quarter.
  • They’re finding it difficult to service their Rs. 7,800 cr. debt; just the interest must cost them around Rs. 200 per quarter, which is about 25% of their sales! (They will need to make 25% margins just to pay the interest on the loans)

But all of this, really, are in hindsight. The problems have been visible, and the FnO piece might have been keeping away the short positions. Tomorrow something new might come and spike up the stock, or take it down much further.

Should I….

With so much unknown, trading this stock would simply be like entering a casino. Someone else will make the money and you’ll see the thrills of ups and downs. There’s a reason this post is marked “Suckered”.

  • pankaj says:

    Thanks for the post. But I am baffled why this stock is up 6% today. I guess nobody would want to buy this stock at this stage. So is it because people who shorted earlier booking profits/ or brief retreat before another plunge?