Shares of cos like HCC, Sun TV, HDIL linked to political parties nosedive as Sebi bars DLF

MUMBAI: Shares of companies that are perceived to be having links with various political parties out of power tumbled on Tuesday after Securities and Exchange Board ( Sebi)’s order barring top DLF officials from accessing the market for three years. Fund managers and brokers said investors are worried that these shares would continue to be weighed down by worries about their prospects, which are known to fluctuate mirroring the changing political fortunes.

Construction firm HCC dived 6.8%, Sun TV declined 5.7%, property developer HDIL fell 5.1% and JP Infratech dropped 3.2% on Tuesday. The Sensex and mid-cap index ended marginally weak. “Investors are exiting stocks where questions have been raised about promoter stability,” said the senior fund manager of a leading mutual fund. “Fund managers generally avoid such stocks as long-term holds in their portfolios.”

Recently, Prime Minister Narendra Modi attacked the Haryana government for clearing a land deal involving Robert Vadra, sonin-law of Congress president Sonia Gandhi and DLF. Dalal Street is interpreting such events as indications that companies that have alleged links with opposition political parties may not thrive in coming years.
“Investors need to focus on companies with superior management capabilities and avoid those whose fortunes are driven by political masters,” said U R Bhat, managing director, Dalton Capital India. “The market does not assign long-term value to companies with sharp practices.” While many of the shares of companies having alleged links to the Congress and National Congress Party (NCP) have languished in recent months, Adani Group companies have been stars on Dalal Street in the same period. The Adani Group is considered to be close to Modi.

While the prospect shares of companies with favourable political moorings appear bright over the next couple of years, analysts said they are not great bets for value pickers. “It is increasingly clear that the ability of the management to deliver superior and consistent performance in a market place that is fair and competitive is the most important criteria in stock selection,” said Bhat.