The stock market in India has witnessed numerous instances of the promoters pledging their shares. Consequently, thousands of common investors tend to wonder about such trends and wish to know the reason behind this, which in fact is not a complicated riddle to solve.’basics of indian stock market By and large, the promoters pledge their shares to raise the debt for their business and meet the planned expenditure including future growth. It could be to raise working capital loans or long-term loans to increase their holdings in the company or to even finance an acquisition. Since promoters’ equity stake is their proclaimed asset, they can utilise the amount raised in any way. It is a good sign as long as the funds are being utilised for the same company. But the investors should be wary if the funds are being used for personal reasons or towards activities which will not benefit the company. In such a scenario, it is essential for investors to know the risks associated with investing in high pledge companies. They must gear up to identify risk vis-à-vis volatility while investing and realize that when they grow their pledge of their shares, they can have a major impact on the stock price. TASHKENT, Uzbekistan
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