Management
quality is one of the key criteria
that investors should be watchful of while investing in shares.
While a lot of that is subjective, there is one parameter
that can give a quick glimpse of the same to some extent.
What we are referring here to is 'promoter pledging'. And if
the recent data is anything to go by, investors do have reasons to worry.
As per an article in The Economic Times Wealth, the total value of promoter shares pledged has gone up by 27% on a year on year basis with percentage of pledged shares at 43.4% in FY15.
As per an article in The Economic Times Wealth, the total value of promoter shares pledged has gone up by 27% on a year on year basis with percentage of pledged shares at 43.4% in FY15.
High promoter
pledging as we all know, is a
vicious circle difficult to come out of if the concerned stock witnesses a
decline in the price.
In such a scenario, more securities are demanded as margin,
thus adding to the negative sentiments.
In the worst case, the institutions may offload the pledged
shares to recover their money, adding to the downward pressure on stock price.
As such, investors should be careful of the leverage and pledging levels while
investing in equities.
And it is perhaps better to avoid the companies where
pledging has not been in the interest of business but for personal use
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