High promoter holding stocks were always considered good for investment. However, since the budget announcement, all does not seem to be well with these stocks. Yogesh Supekar & Shohini Nath find out how many stocks are affected if such a decision to bring down the promoter shareholding from 75 per cent to 65 per cent is implemented. Read on ....
The Union budget 2019-20 may not have enthused equity investors much, but it has managed to make investors think about holding on those shares where the promoter holdings is more than 65 per cent. Indeed, one of the highlights of the Union budget was the announcement made by the Finance Minister Nirmala Sitharaman on the maximum shareholding by promoters wherein it was stated that no listed public limited company shall have promoters holding more than 65 per cent of the total shareholding. This move is believed to be in the long-term interest of the investors and the market participants alike as it can improve the liquidity in the markets as well as enhance corporate governance standards. Says Mustafa Nadeem, CEO, Epic Research " This is a historic move of the government and for the investors as well. This will bring a change where we would see a large chunk of the wealth of a company being passed on to an ordinary investor. They will have a stronger voice from here on. So, the move by the government is a great move, though it may have some other ripple effects."
When it comes to the impact on the stock prices, the opinion is divided on the announcement. While there is a broad consensus in the market that such a move will have a negative impact on all those shares where the promoter holding is more than 65 per cent, there is always a probability of the stock prices overshooting on the downside, thereby creating opportunities for the long term investors. It is not always easy to identify such lucrative opportunities, but then situations like these help long term investors create wealth.
As of now, the dilemma faced by a majority of investors is whether to hold stocks where promoter holdings exceed 65 per cent or to get rid of them – only because of the budget announcement.
Why the dilemma?
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