The new norms making it mandatory for the listed companies to have at least 25 per cent of their equity with the public will bring more transparency into the system and will help control asset inflation, say analysts.
Among the BSD 500 companies, there are 63 companies that have public shareholding below 25 per cent including public sector giants such as NTPC, MMTC, NMDC and private sector biggies like Wipro, Reliance Power and DLF.
"The government move will help bring down asset inflation. The additional equity flow will ensure that investors get quality papers," Angel Broking managing director Dinesh Thakkar told PTI.
Due to the increased inflow of liquidity into the market, most of the papers available now are inflated, he said, adding
"a lot of liquidity is coming into the market. But there are not many good papers, which, in turn, have inflated the
available papers. The fundamentals are not supporting the current prices. This move will help to correct the pricing."
Another important factor is that this move will help the market achieve its long-term goals such as transparency and
reduced manipulation, Kejriwal Research and Investment Services director Arun Kejriwal told PTI.
"If this much of papers come to the market, it will be a better place to invest and it will help achieve the long-term goals like more transparency and reduced (stock price) manipulation," Kejriwal said.
In short-term, the flood of papers may make an impact. But on the flip side, there is a possibility that some of the
MNCs may even choose to delist, Kejriwal said.
"The government move comes at a time when many MNCs are trying to increase their shareholdings to 90 per cent. If they decide to de-list it will nullify the short-term flooding of funds," Kejriwal said.
On the other hand, these analysts also note that the new norm will also put a lot of strain on liquidity in the market.
Angel's Thakkar says though Rs 60,300 crore is a big amount, it can be pumped back into the market within five years.
"Though Rs 60,300 crore is a big amount, the entire money will be infused in to the system within five years. If one
sees the growth of our market, it can be seen that it has grown by five to six times in the last five-six years, while
the market cap has grown by 10 times during this period," Thakkar said.
According to him, 40 per cent of this market cap came from the fresh issues. "The 40 per cent of the present market
cap came from the fresh issues within past five years which means that our market has real-time capacity to absorb the
huge infusion of fresh papers," he said.
Above all, a lot of liquidity from all over the world is coming to the country and the new norms will help to ensure
enough quality papers in the market, Thakkar added.