Leveraged positions of promoters and companies are becoming risk factors for the market, especially in cases where such information is not available in the public domain, said Aditya Narain, MD and head, India Research, at Citi Global Markets India.

Promoters of many listed companies have raised finances by pledging their shareholdings. When they pledge their shares, they pledge their voting rights as well and hence it becomes a risk factor. And deleveraging of such positions has the potential of deteriorating the company's valuation.

Many listed companies have some projects under special purpose vehicles or under unlisted subsidiaries, said Narain. Leveraging of such ventures, when not known to the market, is also a potential risk.

While addressing mediapersons on Citi's view on Indian equities, he said, "On the regional perspective, Citi has reduced the level of underweight on the Indian market for 2009 compared to 2008 as the valuations have turned attractive and India is less dependent on world market compared to China."

Citi has raised the level of overweight for China.

Narain, however, said that "sell calls for Indian companies are at very high levels at present." At the peak of the market in 2008, out of 140 companies that Citi has been covering, 35 per cent were carrying sell calls, but currently 50 per cent of the companies are bearing sell calls.

For a few more quarters, the market will continue to be uncertain; at the end of the year, it will be certainly better than what it is now, he said. However, Narain added that the bounce-back need not be steep.

On the Indian economy, Narain said the current account deficit is no more a big concern and for 2009-10, it may just be confined to $10 billion (Rs 500 billion). The two big positives for the Indian market are lower crude oil prices and falling interest rates. Also, fund managers globally have started looking at India neutrally. They were very negative a couple of quarters ago as India's valuations were still high in those days.

Post-Satyam, fundamentals have not changed much, he said, but added that the momentum that was seen in the market due to pump prime measures by the Centre and the Reserve Bank of India [Get Quote] has been broken. However, the Citi analysis says the recent stimulus measures along with lower oil and commodities prices is setting the stage for a pick-up in 2010-2011.

Disgraced Satyam [Get Quote] founder B Ramalinga Raju pocketed Rs 1,230 crore (Rs 12.30 billion) much before he disclosed the accounts had been fudged to inflate profits. He did this through the pledging of promoters' shares, which are now worth just about Rs 66 crore (Rs 660 million).

Information available with stock authorities reveal that all the promoter shares held through SRSR Holding were pledged for Rs 1,230 crore (Rs 12.30 billion). As per the statutory regulatory filings, the process of pledging started way back in September 2006, when promoter entity SRSR Holding held over 27.8 million shares, comprising 8.51 per cent of total equity.

With additional inputs from PTI

Also see
Complete coverage: The Satyam fiasco