The flourishing practice of private financing of shares was dealt a bodyblow by the recent decline in the stock markets, specifically the few counters where the financiers have been hyperactive in the recent past.

Sources said the private financiers across the country had incurred huge losses due to the crash in prices of select scrips namely Himachal Futuristic, GTL, Zee Telefilms and DSQ Software following the rising border tension.

These shares have recorded an erosion of 40 to 70 per cent over the past seven trading sessions. "The activities of the private financiers had been mostly restricted to these counters," confirmed a source close to a big-ticket financier.

He said the size of the private financing market in the country was estimated to be nearly Rs 500 crore and 80 per cent of the total corpus was invested in these counters.

Sources said the downslide in share prices following the December 13 attack on the seat of Indian government has not only forced the financiers to incur loss but also hammer the shares down further.

Consider this: a financier bankrolls a trade of Himachal Futuristic at Rs 135 at a certain interest rate (usually at 20 per cent or more).

The predetermined stop-loss price is fixed at Rs 115. Now, when the market falls below Rs 115, the financier forces the broker to sell shares. When the unloading is big, it creates pressure on the downtick. The net result is that the share price falls further.

A quick look at these four counters confirm the loss of the financiers as well as the fuelling of the fall in share prices due to this cascading effect.

Zee Telefilms went down to Rs 100.60 today from Rs 140.40 on December 12 (the day before the attack on the Parliament) on the National Stock Exchange.

During the period, Himachal went down to Rs 81.20 from 131.40, GTL to 97.30 from 165.20 and DSQ to 47.10 from 71.35. In percentage terms, Zee recorded a fall of 39.56 per cent, GTL 69.78 per cent, HFCL 61.82 per cent and DSQ 51.48 per cent.

However, the huge loss of private financiers are unlikely to affect the pay-out mechanism of any stock exchanges, confirms experienced market players.

A senior member of the Calcutta Stock Exchange, as well the NSE said the private financing mechanism did not influence the official trading system and therefore no immediate crisis was foreseen.