Promoter Stake Sale Must Be Seen 'Case-To-Case' As All Might Not Be Bad, Says Vinit Sambre Of DSP Mutual Fund

The increasing promoter sales in India's stock market might not be all bad but might trigger a consolidation when the supply overtakes demand, according to Vinit Sambre, head of equities at DSP Mutual Fund.

The promoters of the NSE Nifty 50 companies trimmed their share by about 50 basis points to 42.6% in the June quarter, compared to the previous three months.

This was primarily driven by a fall in the private promoter ownership which plunged to a 17-quarter low of 29.3%, according to the data from the NSE.

This magnitude of promoter selling ideally is showcasing the tipping point that markets are at a high point, Sambre told NDTV Profit in an interview. "Promoters also feel that valuations for their businesses have reached a point which does not look sustainable."

History would suggest that these signals should be pointing that the market could be at the top, Sambre said. "This time, they have sustained for a longer period." Stocks sold by promoters have largely seen improvement as they got absorbed from huge liquidity, he said.

This trend could sustain till there is demand for quality businesses, he said. "When supply overtakes demand, people will start cutting position which is when we will see some more consolidation."

Promoter offloading stake must be on a case-to-case scenario, Sambre said. Sometimes it provides opportunities for investors, and increases free float along with more return on capital employed. "Those are good spots."

On the high valuation front, Sambre said that this will be something that we will have to live with at this point.