As the question of stretched valuations continues to swirl through Dalal Street, promoters seem to be firmly on course toward breaking the hitherto all-time calendar-year stock dilution record – set in the 2020 Covid era. So far in 2024, both domestic and overseas promoters have sold shares worth nearly ₹65,000 crore – not far from the 2020 high watermark of ₹78,500 crore.
The pace – and timing – of promoter dilution seemingly shortens the odds on an impending correction as valuation comfort shrinks across the market capitalisation spectrum, although large caps appear to have advanced more slowly than their smaller peers.
“Such large-scale selling can be interpreted as a signal of caution or profit-taking amid possibly high market valuations,” said Amit Goel, chief global strategist, Pace 360.
Agencies ₹48kcr of Shares Sold in 2023
“Promoters typically know their companies well and may be leveraging market conditions to monetise their holdings, possibly anticipating a correction or wanting to realise gains in a buoyant market,” Goel said. In 2023, promoters had sold shares worth ₹48,000 crore. The quantum of sales was mixed in the previous two calendar years – at ₹25,400 crore and ₹54,500 crore, respectively. These are shares sold by promoters via open market transactions.
Foreign & Local Promoters
Last week, UK’s Vodafone Group Plc sold an 18% stake in Indus Towers for ₹15,300 crore through the open market transaction. Earlier this month, global investment firm Blackstone, promoter of Mphasis, divested a 15.08% stake in the information technology and consulting company for ₹6,735 crore.ZF group last week sold a 7.5% stake in its listed Indian subsidiary, ZF Commercial Vehicle Control, for ₹2,193 crore. Fosun Pharma sold ₹1,754 crore of in Gland Pharma last week.
“Many promoters, especially in mid- and small-cap companies, seem to be capitalising on the current bull run, with stocks rallying for the fourth consecutive year,” said G Chokkalingam, CEO, Equinomics Research.