Art Of Stock Investing Indian Stock Market
Look at carnage that took place recently in the market. “the Indian stock market remains a fertile ground for price manipulation. The mid- and small cap companies frequently witness wild swings in their stock prices.
Small investors are usually the ones who suffer the most, even as unscrupulous operators laugh all the way to the exchange.” How does this happen? The Feb end fall was attributed to the pledged promoter shares being sold in the market by the financial institutions (FI) in which they are given as security. Promoters pledge their share holdings in their company to raise money for either investing in the company or at times for other personal use.
Learning Stock Market Investing
This book will un-cover the basic fundamentals of Indian Stock Markets & generally any stock market really. I intend to make this book as short as possible and to the point with no intention to confuse you. Financial Markets* - Includes Stock Market (Equity Markets), Bond Markets, Commodity markets, Derivatives Markets and so on. Look at carnage that took place recently in the market. '.the Indian stock market. The Art Of Manipulation In The Stock Market. India Investment.
Stock Investing Companies
The amount loaned is 50 to 70 per cent of the value of stock pledged. This reduction is also called hair-cut.
The FIs ensure by valuing the stock from time to time that the hair-cut percent remains more or less the same. Otherwise they call for additional shares or cash which called ‘margin call’. When the proportion of pledged shares is large and the floating stock i.e. The number of shares available for trading is low, any selling by the FI creates a huge downward pressure on the stock price. “Brokers also raise money for companies by putting up a basket of shares as collateral with financiers.
This is safer than pledging shares of an individual company because the chances of the entire basket losing value are significantly lower. The financier agrees to lend the money to the broker (not the company), who, in turn, passes these funds to the promoters after taking his cut. This is what happened in February, when a number of companies borrowed money from brokers via this route. However, all hell broke loose when share prices fell and brokers were unable to stem the tide of margin calls from financiers.
When they could not arrange the additional funds, the lenders dumped the pledged shares to recover the money.” How do you identify such situations? Source: The Economic Times.