I was going through the List of securities which are allowed to be pledged @ Zerodha. I noticed some Stocks get high haircut as high as 40% to 100% and some get low haircuts like Dabur get a Haircut as low as 12.5 %. As an investor looking to pledge securities I am curious about the methodology used to determine the haircuts for these various securities. Does lesser haricut mean that those shares are considered safer by Zerodha and the Exchange? Can it be used as an indicator of better fundamentals ? Please Enlighten.
Clearing corporations decide the haircut, brokers just follow it. Volatility is the main input considered in calculating haircuts maybe along with few others. So, lower haircut may not necessarily mean they are good companies as such but once should not draw that inference.
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