27 Jun Rs 1 lakh crore selloff tsunami threatens Nifty rally as promoters, strategic investors exit
Promoters alone have offloaded shares worth about Rs 61,000 crore, while PE/VC firms have exited nearly Rs 28,000 crore. Add to that the Reliance Industries’ Rs 9,580 crore offloading in Asian Paints and a smattering of block deals by other strategic investors, and the tally breaches the Rs 1 lakh crore mark, according to data compiled from PRIME Database and the NSE.
The exodus began in earnest in May with a series of blockbuster deals. Rakesh Gangwal, co-founder of IndiGo, sold shares worth over Rs 11,560 crore on May 27 in a fresh round of stake trimming in InterGlobe Aviation. A day later, British American Tobacco (BAT) offloaded a 2.5% stake in ITC through its subsidiary for around Rs 12,900 crore in one of the largest single-day exits ever recorded.
Singapore Telecommunications wasn’t far behind, selling Bharti Airtel shares worth Rs 12,880 crore on May 16.
June has maintained a frenzied pace. Vishal Mega Mart’s promoter sold a 19.6% stake to mutual funds in a Rs 10,220 crore bulk deal, while Bajaj Finserv’s promoter offloaded approximately Rs 5,500 crore worth of shares earlier in the month. The figures will surge higher when accounting for block deals in PB Fintech, Mobikwik, Coforge and Delhivery executed on Thursday.
The supply pressure is creating a bifurcated impact across the market. “Selling by promoters/PE is being witnessed in few stocks and in those companies, in the short term, upside can be capped as most of the demand from institutions have been fulfilled and support in the secondary market is likely to reduce,” warned SBI Securities’ Sunny Agrawal.Also Read | Promoter, PE & VC selling crosses Rs 40,000 crore in 2 weeks: Red flag for Nifty bulls?
Why are promoters selling?
“Block/bulk deals are happening as domestic investors and mutual funds are flush with money and now FIIs too have come back which has resulted in greater liquidity in the market,” PRIME Database MD Pranav Haldea told ETMarkets, noting the confluence of factors driving the selling spree.
The veteran market observer struck a measured tone on whether this represents a market peak. “Some promoters and investors have sold because valuations were attractive for them while others have their own strategic reasons. It’s not necessarily a sign of a market peak, which no one can predict.”
Haldea sees the PE/VC exodus as a sign of maturation rather than distress. “PE/VC selling through IPOs and then further through blocks is a sign of maturing of the capital market ecosystem and a deepening of the market. This is similar to what we find in the western markets as well. Through such exits, they are able to return money to their investors and then raise money to invest in the next set of companies.”
Context is King
Market veterans emphasize that the quantum and context of selling matters more than the absolute numbers. “Promoter selling isn’t inherently bearish; its signal depends on why the shares are being offloaded and what ownership remains afterward,” said Arvind Kothari, smallcase manager and Founder of Niveshaay.
Kothari outlined multiple benign reasons for promoter exits: “In many cases, promoters trim stakes to meet minimum-public-shareholding rules, unlock liquidity for estate or philanthropic planning, onboard marquee strategic or long-only investors, optimize taxes near fiscal year-end, or fund expansion in privately held group businesses — none of which imply deteriorating prospects for the listed entity.”
The key litmus test, according to Kothari: “If the promoter still retains a commanding stake, the sale occurs at only a modest discount, and company fundamentals remain intact, the transaction is simply a liquidity event that can broaden free-float and deepen institutional ownership.”
Red flags only emerge “when divestments coincide with slipping earnings, heavy pledge unwinds, or a steady slide toward loss of control,” he cautioned.
Institutional Appetite Remains Strong
Despite the supply deluge, institutional demand has largely absorbed the selling pressure. “Some supply pressure is inevitable when markets rally — and to an extent, it’s healthy. It improves free float and brings price discovery in names that were tightly held,” said Mihir Vora, CIO at TRUST Mutual Fund.
“In many cases, we’ve seen these sales met with strong institutional demand, especially from domestic mutual funds and insurers,” Vora added, highlighting the robust domestic investor base that has emerged as the market’s backbone.
His fund’s approach focuses on intent: “We look at the intent behind the sale. If promoters are monetizing to invest back into the business, or if PE/VC funds are exiting after long holding periods, it’s not a concern. What we avoid are situations where exits are paired with governance red flags or signs of operational stress.”
As Indian markets navigate this wave of insider selling, the ultimate test will be whether domestic institutional investors can continue absorbing the supply while foreign investors maintain their renewed interest in Indian equities. The answer may well determine whether this selling spree marks the peak of the current rally or simply the growing pains of a maturing market ecosystem.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)