10 vulnerable stocks to watch out for

10 vulnerable stocks to watch out for

While all shares fell sharply in the carnage across the world, there were some companies that witnessed their market value erode sharply. These were shares of companies where a large quantity of the stock is pledged with banks. 

Typically, promoters pledge their holding and raise loans from banks. They receive about half the market value of the shares pledged. However, when share prices fall sharply, banks insist on additional security. If promoters are unable to provide that quickly, banks resort to selling those shares in the market. This looms on companies that have a high percentage of pledged shares. 

Here are companies to watch out: 

1. Suzlon Energy—Promoters of Suzlon, a non-conventional energy company, own 22%. About 99% of this holding is pledged with banks. Suzlon shares fell over 10% on Monday and continue to slide today. 

2. GMR Infrastructure— The company operates airports in Delhi and Hyderabad and other cities and many other infrastructure projects. It has shed 18% in market value. Promoters control 64% of the total outstanding shares. They have pledged 84% of their holding with banks. 

3. Essar Oil—Shares of Essar Oil fell 10% on Monday but have recovered today gaining 3% in value. Promoters own 25% and have pledged 18% of their holding with banks. 

4. Crompton Greaves—After tumbling about 14% on Monday, shares of Crompton Greaves recovered on Tuesday. Promoters of this company have pledged 23% of their holding with banks. They control 34% overall in the engineering company. 

5. Reliance Power—Shares of Reliance Power continue to slide on Tuesday. The company’s promoters have pledged 34% of their stock with banks. The Anil Dhirubhai Ambani Group owns 75% overall equity in the power producer. 

6. JSW Energy—Another power producing company, witnessed share price tumble 18% on Monday. It has recovered since then. Promoters have pledged 34% of their holding with banks. Power sector companies need significant capital to execute the massive power projects that they undertake. 

 7. JSW Steel—Shares of JSW Steel traded flat on Tuesday after tumbling 14% on Monday. Promoters have pledged 17% of the 40% equity that they hold in the steel company. The JSW group may have to bring in more security if share prices of its group companies fall rapidly. 

8. Zee Entertainment: Things were looking better for this company as the stock gained 21% in value in 3 months. Promoters have pledged 16% of the 43% holding with banks. Zee shares were under pressure on Monday and shed 10% in value. On Tuesday, they rose 2%. 

9. Dish TV: Shares of Dish TV, another Zee Group company, tumbled 17% on Monday. They are gaining ground on Tuesday but promoters have 16% holding pledged with banks. Unlike other companies, this is not a large share of their overall holding of 64%. 

10. Reliance Capital: Shares of Reliance Capital, an Anil Dhirubhai Ambani Group company, shed close to 20% over the past two days. The promoter group has pledged 17% of the overall 53% shares held by them. The group also has Reliance Infrastructure besides Reliance Power where promoter holding is pledged.

 Happy Investing

Source:Yahoofinance.com