In dyes/pigments Colour Chem gained 600 to Rs 2,265, Mardia Chemicals rose Re 0.40 to Rs 6.40, Atul Products went up Re 0.55 to Rs 20.85. In chemicals-alkali Bihar Caustic gained 2.45 to Rs 13.05, Gujarat Alkalies was up 5.85 to Rs 28.95, Punjab Alkalies rose Re 0.70 to Rs 6.40. In chemicals-speciality BASF rose 24.80, Foseco went up 40.75 to Rs 271, Dai-Ichi Karkaria dropped Rs 2.45 to Rs 18.35.
In housing finance HDFC dropped Rs 91 to Rs 2,203, LIC Housing lost Rs 1.35 to Rs 37.50, SBI Home was down Rs 1.05 to Rs 10.15. In financial institutions ICICI gained Re 0.50 to Rs 72.90, IFCI lost Rs 1.45 to Rs 13.45, IDBI dropped Rs 8.25 to Rs 33.25. In diamond & jeweuery Parekh Platinum lost Rs 2 to Rs 8.60, Suraj Diamonds was down Rs 1.05 to Rs 13.85, Suashish Diamonds dropped Rs 3.80 to Rs 42.25. er incurs significant transaction costs. Liquidity has a lot of significance to investors and the economy as a whole because the basic economic rationale of a market is the efficient allocation of resources. Illiquid stocks in the coming days are expected to lose investors' interest. Let us look at the rAi or advantages of a high liquidity to the investor, company and the economy as a whole.
Better prices
Most investors hate price manipulation because it creates an artifical tump
or a fall in prices. But manipulating highly liquid stocks like Satyam and
Pentafour is not only very difficult but also very expenswe. It is in this sense that a highly liquid stock gets better discounting in the market as prices respond immediately to information. This, in turn, reduces the impact cost and the transaction cost. Impact cost is the cost an investor suffers due to the difference between the buy and sell price. On the other hand, illiquid stocks lack resilience so investors may not get the best price.
Fund raising
Highly liquid companies find it much easier to raise funds from the market
compared to companies that are illiquid. For instance, it is very easy for a highly liquid stock like Satyam and Pentafour to raise funds from the market. Perhaps, it is for these reasons that most software companies have found it much easier to raise funds even at most difficult times. Here, the investor will also benefit as far as raising money is concerned. Loans against shares are available only on the stocks that are highly liquid.
Liquidity commands-premium
The major consequence of illiquidity is the Deviation from the market efficiency. In an ideal market, all price changes are constant but in an illiquid market some price changes are transitory as a result of which decision making gets much more complicated for buyers and sellers. Liquidity premium is associated with increasing illiquidity in the market as in case of il
