Market experts say firms with high pledging have seen sharp selling. “Conservative investors are quick to exit companies where there are high levels of pledging. Investors are warier of companies where along with pledging, there is high leverage,” said G Chokkalingam, managing director of Equinomics Research and Advisory.
Emami, where promoter pledging has increased by 17.66 percentage points to 89.24 per cent, saw its shares declining 34.1 per cent in YTD.
For JSW Energy, the pledging (as a share of promoter equity) increased by 16.67 percentage points, and shares were down 41.78 per cent YTD. For Jindal Steel and Power, the pledging went up by 9.22 percentage points, while stock slid 41 per cent in YTD.
Among others, Adani Ports’ stock has corrected 16 per cent YTD; pledging has risen by 21.84 percentage points.
Analysts say that sectors, such as power, construction and metals, which have been most exposed to cyclical risks, are likely to see a higher proportion of promoter holding getting pledged in the coming days, given the slowdown in economic activities.
However, market participants add that some of the stressed promoters may be able to delay margin call if lenders are given the confidence that payments will be made in full.
“Lenders could delay selling the pledged shares
as recovery from such selling is likely to be less with shares already at beaten-down prices,” said a fund manager.