morning thoughts...

Once again the markets traded in a very tight zone and with volatility but found buying supports at lower levels , though index was in a range as said specific stocks were at their best and many were making new highs.

Technically the markets will follow the same pattern as intimated and give opportunity to both long and short traders.

The earning season is here now. And along with the quarterly performance, the companies have crucial information to reveal. We are here referring to the shareholding pattern and most importantly, the promoters' share pledging. Going by the latest disclosure, retail investors have reasons to be concerned. As per an article in Indian express, 345 of BSE 500 companies have released shareholding data. And guess what? The share of promoter pledged shares has touched all time high of 10%. 
But what could explain the rise in promoter pledging in current times? Desperate times lead to desperate measures we believe. In the times of liquidity crunch, slowdown in the project clearances and rising inflation leading to high input prices there are cases when the reasons behind pledging are genuine.

However, even in such cases, the investors need to be watchful of how these funds are being used. 

Before we discuss why investors should be bothered, let us first dig into the reasons for pledging. Promoters may pledge shares to raise funds from banks or NBFCs for company's growth, such as acquisition, capacity expansion or to finance new project. The pledged shares act as collateral for the borrowed funds. Or it could be collateral against a medium term loan taken for the company, for e.g. working capital loan. In some cases, the promoters pledge shares when valuations are high to borrow funds at low rates to meet personal needs or to invest in unrelated investments such as realty etc. At times, pledging could be a part of corporate debt restructuring (CDR) process, where lenders use it to ensure that promoters stick to the new restructuring terms. In short, pledging by itself is not illegal or bad.

We have already intimated the very important astrological changes which are due in coming days and its higher effect will be witnessed on both stock markets and commodity.

On the lower side 6650 remains as crucial supports whereas 6950 will act as stiff resistance zone for the markets.

Amidst all the volatility in the markets certain sectors like pharma and infra will continue to outperform.
Given the risks associated with pledging, the regulators need to ensure that the interests of the minority shareholders are protected. It was after Satyam scam that SEBI woke up to need of making pledging disclosure mandatory. However, the move is incomplete unless investors get elaborate details of the quantum of funds borrowed, the end use of the money for which the shares are pledged and debt levels at regular intervals. We hope SEBI won't wait for another scam to resurface before making such disclosures a norm. 
Until then, we would suggest investors to be very cautious with respect to management quality. When you are choosing a stock that has promoter stake pledged, get into the details of pledging. Companies that are over leveraged and where high percentage of shares is pledged could be a value trap for retail investors. Hence, avoid companies with high pledging, dubious management quality and high leverage ratios, no matter how attractive the valuations appear. 

Coming to the commodity markets which have been stuck in a range from quite few days , the trend is likely to continue and bullions will attract buying at lower levels and selling at higher levels.

The strategy for base metals and energy remains as a buy on dips.

Wockardt pharma , sparc remains favourite on buying list .
As above we have explained and mentioned promoters pledging , stocks like hexaware  will show bloodbath , full list for stocks is ready

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Yesterday’s calls sent via sms and messenger

Gold Mcx – booked profits at 28900 – long from 28677

Silver Mcx – booked profits at 42417 – short from 42679

Crude Mcx – booked profits at 6125 – long from 6029

Bank nifty – buy at  cmp 13050 sl 13010 targets 13250 – booked profits at 13215

Fii Tech mahindra – buy at cmp 1749 sl x targets x - holding

Siemens – buy at cmp 763 sl 757 targets 777 – hit sl

Jp associates – buy at cmp 55 sl 54 targets 59 – booked profits at 58

Upl 270 ca – buy at cmp 7 sl 5 targets 15 – booked profits at 14.10