Would you believe if we said a stock gave you 67,000% returns in just one day? Well, it did happen with Elcid investments last month. Elcid became the most expensive stock in India at ₹3.3 lakh per share! But today, it’s already 27% below its peak. But how? What? Why? Where? When? Let us give you some context before that. Elcid’s jaw-dropping rise wasn’t random; it was due to a special auction framework recently introduced by SEBI for investment companies. One of the mandates under the new framework was that an investment company's stock would be put up for a special auction if its 6-month average price was less than 50% of its book value. But in this case, the book value isn’t the usual one; it’s calculated based on the market value of the company’s listed investments. So, as of March 2024, 99% of Elcid's value came from one stock - Asian Paints. Asian Paints has fallen 15% since then. Therefore, Elcid’s market-value-based book value also started dropping. Now you get the gist of it. But if Elcid's share price keeps falling, will it go for an auction again? Well, Elcid’s price might hit the trigger for another auction. But here’s the catch - the stock needs to stay below the trigger for six months straight to qualify again. So, why is Elcid trading so far below its book value? Simple - 1. It’s illiquid. 2. It’s ridiculously expensive. Elcid’s uniqueness of being the most expensive stock is also its curse. Why would anyone buy such a high-priced, illiquid stock that tracks Asian Paints when you can buy Asian Paints directly? Check out the graph of Elcid’s journey. Also, what do you think about them putting all their eggs in one basket? Whether it's an investment firm or a personal portfolio, do you think diversification is a must? Comment down below, and let’s chat. #stockmarkets #financeupdates #diversification
