Sometimes seemingly adverse incidents can be looked at as an opportunity, both for the individual investor as well as for the corporate sector. The recent order from the market regulator SEBI to have public shareholding at a minimum of 25% is a case in point.
Equity-wise, however, these stocks should see some interesting movements until they stabilise.
“Companies with more than 75% promoter holding need not necessarily be companies that are not fundamentally strong,” said Gaurav Saravgi, vice-president, ECM, Centrum Capital.
There may be some cases where even good companies may not have been able to comply with 25% public shareholding norm by June 3, as they may have already initiated the process but were not able to do so due to some procedural issues.
“I don’t think that such companies need to be avoided as performance is not linked to shareholding percentages,” said Sachin Shah, a fund manager, Emkay.
“Why should the retail investor avoid such companies,” wonders Sunil Sharma, founder, Radisson Consulting. Such companies have several advantages as they may be cash rich or performing well which could account for promoters holding on to large chunks of equity.
Even taking a stringent attitude, only good can come off the SEBI move.
“It’s a welcome move for investors and we feel that sharp erratic movements in stocks especially small and midcap stocks will reduce,” said Yogesh Nagaonkar, head, Institutional Broking-Bonanza Portfolio Ltd.
However, for a small period of time, investors may approach such companies with caution.
“One should avoid these stocks,” cautions Alex Mathews, head research, Geojit BNP Paribas Financial Services Ltd.