Block deal activity hits 6-month low at Rs 25,669 crore as markets wobble

Relentless selling by FPIs, disappointing earnings growth during the second quarter, and a rising US dollar have taken the wind out of the sails for secondary share sales

The domestic equity markets are grappling with a pronounced slump in secondary share sales. Block deal activity in November fell to its lowest since April this year, with transactions totalling Rs 25,669 crore, a sharp decline from the monthly average of nearly Rs 57,000 crore seen during the first 10 months of 2024.

 

Several private equity firms, promoter entities, and others are holding back their share sale because of waning interest from large institutional buyers, besides broader market uncertainties, according to industry experts.

 

In November, the benchmark Nifty 50 index recorded back-to-back monthly losses for the first time since February 2023. Since hitting the record high on September 27, the index has come off as much as 10 per cent amid aggressive selloff by foreign portfolio investors (FPIs). 

 

 

FPIs offloaded Rs 21,612 crore worth of shares in November, following a Rs 94,017 crore selloff in October. Analysts note that FPI outflows would have been even steeper if not for fresh investments in India’s primary markets.

 

Market sentiment has been undermined by a confluence of factors, including lacklustre corporate earnings in the second quarter of 2024-24, a strengthening dollar, and rising US bond yields. The surge in the dollar has been further bolstered by the geopolitical and economic implications of Donald Trump’s return to the US presidency, prompting FPIs to reduce exposure to emerging markets like India.

 

The across-the-board market correction has cast a shadow on block deal activity, said Deepak Kaushik, executive vice-president and group head of ECM at SBI Capital Markets. “The moment valuations dip, the pipeline gets disrupted. Some have put their share sale plans on hold, while many have shelved it indefinitely.”

 

Block deals — large share sales in listed companies by existing shareholders — are executed through a separate window provided by stock exchanges. Such transactions allow mutual funds and other institutional investors to pick large quantities of shares without distorting the price. According to market players, block deals typically thrive in bullish markets when liquidity is abundant. 

 

Some bankers attributed the slowing block share sales to technical factors, such as the results season. “Insiders cannot sell until the result day is over. By the end of December, you will see blocks picking up,” said Ajay Garg, managing director of Equirus. “There has been a price correction. Some deals have been postponed as sellers seek better pricing in a market adjusting to new valuations.”

 

While block deals struggle, India’s initial public offering (IPO) market remains robust. October saw six IPOs raise Rs 38,686 crore, while November witnessed eight issues raising Rs 31,105 crore.

 

Bankers attribute the IPO market’s resilience to firms’ willingness to adjust valuations in pursuit of growth capital. “Regarding IPOs, no one has shelved its plans. Here, the impact is seen more in terms of subscription numbers,” noted Kaushik.

 

Top block deals in November were seen in Sanofi Consumer Healthcare and Wipro. In both cases, promoter entities pruned stakes. Only substantial block deals by a PE firm were seen in PNB Housing Finance.