How This Stock Lost 46% In Three Days?

Updated: Wednesday, August 24, 2016, 13:42 [IST]

Stocks markets are so uncertain, you have no clue, when your capital can erode. In fact, once your capital erodes, its very difficult to make-up for losses.

Welspun India is a leading exporter of towels, bedsheets and supplies to some of the biggest retailers in the US including Walmart, Target and companies like J C Penney.

On Aug 16, the share price of Welspun India closed at Rs 104 (face value Re 1). By Aug 24, the share price almost halved to Rs 59. As we write there are only sellers in the counter at Rs 59. This means that the stock could again crash another 10 per cent when markets open on Thursday.

What is wrong with Welspun India?

Target Corporation, the second largest retailer in the US said that it was severing ties with the company as it had used cheap cotton, instead of fine Egyptian cotton in making bedsheets.

The stock plunged, following the news on Monday and worse now there are worries that other big customers may also severe ties. The Mint has reported that Walmart is reviewing Welspun cotton certification records and plans to have additional conversations with Welspun.

The company derives a while lot of revenues from the US and if there is even the slightest doubt on transparency or governance issues stocks can be punished severely.

Welspun India shares have hit a new 52-week low and there is no telling where it is headed. The stock is also owned by many Foreign Portfolio Investors.

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