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Smart investors cash out as markets rise

Private equity players, sovereign funds and top executives have been selling

N Sundaresha Subramanian & Samie Modak  |  Mumbai 

The smart investor is selling. Among the top sellers are global institutions like Citigroup, private equity players like Carlyle and Warburg Pincus and domestic majors. Some top executives and promoters have also been selling while others have announced their intention to sell.

The latest to join the list is Wipro’s Azim Premji Trust. On Monday, the promoter-group entity announced its intention to sell shares worth Rs 1,500 crore. Several others, including State Bank of India (SBI) and ICICI Emerging Sectors Fund, have sold their long-term holdings in Multi Commodity Exchange after listing at a huge premium. Experts say sales in such huge quantities was unthinkable only a few months ago. According to them, many private equity funds, which invest with targeted time frames but could not sell last year due to weak market conditions are selling now.

Sandip Sabharwal, chief executive (portfolio management services), Prabhudas Lilladher, said, “It’s not a question of price but of time. Last year, the market was dead, there were no volumes. Sentiment was really bad. Promoters and investors couldn’t sell even if they wanted to at any price.” The deal where Citi could sell a huge quantity of shares at almost the existing market price wouldn’t have been possible last year, he adds.

Few large investors have sold their entire holdings in Indian companies
Company Seller Amount (Rs cr) Date
YES Bank Khazana 535 12-Mar
HDFC Citigroup 9,555 25-Feb
HDFC Carlyle 1,354 2-Feb
ICICI Bank Temasek Holdings 1,472 2-Aug
Some prominent insiders who sold shares between Jan & March


No of shares Date
Bajaj Electricals Shekhar Bajaj 2,175,000 27-Feb
Piramal Healthcare Ajay Pirmal 8,000 2-Mar
HDFC Keki Mistry 15,000 22-Mar
Cairn India Rahul Dhir 1,086,000 31-Jan
Source: BS Research Bureau

In some cases, like in Wipro, it’s the regulations that demand promoters to pare their stakes. Wipro’s public shareholding is below the minimum threshold of 25 per cent. The company has to raise this by next year.

Share prices have been buoyant for over two months, beginning January. From the 15,000-levels, the Sensex has gained around 20 per cent, riding on heavy inflows from foreign institutional investors.

Rajeev Thakkar, CEO, Parag Parikh Financial Advisory Services, said, “It’s a better time compared to last year as prices are higher. But, whether it is a good price to sell in absolute terms varies from company to company. Stock prices are not as high as they were in January 2008.”

Selling by smart investors could also be construed as a bearish sign as these investors do not see further upside. But, Sabharwal said such selling is usually seen at the beginning of a new bull market. “Some investors who think the rally is a flash in the pan are also selling their shares. This is what happens typically in the first stage of the bull market. There is disbelief in whatever is happening.”

Senior executives like Rahul Dhir of Cairn Energy, Keki Mistry of Housing Development Finance Corp and Ajay Piramal of Piramal Healthcare have also been sellers in this rally.

Some of them have termed these as routine selling to provide cash to subscribe to stock options. “If a company official is getting stock options, it makes sense to sell as you may be selling at Rs 100 and buying at Rs 50. They will sell regardless of the price,” said Thakkar of Parag Parikh.

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First Published: Wed, March 14 2012. 00:54 IST