The BSE Sensex sank 0.99% to close at 39,513.39, down 394.67 points
Proposals to exempt securities transaction tax on options trading, remove short-term capital gains for fund of funds of central public sector enterprises and relaxations for offshore funds failed to soothe the markets
The budget’s proposals to hike minimum public holding in listed companies, tax share buy-backs and raise the tax surcharge on wealthy individuals disappointed the markets on Friday, sending stocks down by 1%.
Proposals to exempt securities transaction tax on options trading, remove short-term capital gains for fund of funds of central public sector enterprises and relaxations for offshore funds failed to soothe the markets.
Immediately after Union finance minister Nirmala Sitharaman announced listed firms will need to maintain a minimum public shareholding of 35% against the current 25%, the benchmark indices fell by more than 1%.
The BSE Sensex sank 0.99% to close at 39,513.39, down 394.67 points, while the broader Nifty index ended at 11,811.15, down 135.60 points or 1.14%. BSE MidCap and SmallCap indices were down over 1% each.
Currently, listed companies must cap promoter holding at 75%; now this will change to 65%. The change will force at least 167 firms in BSE 500 to sell shares to the public. Among all listed firms on BSE, 835 have promoter holding over 65%.
“It is the right time to consider increasing minimum public shareholding in the listed companies. I have asked Sebi (Securities and Exchange Board of India) to consider raising the current threshold of 25% to 35%," Sitharaman said in her maiden budget speech.
There is some relief for state-owned firms though, which can maintain a public float of 25%. In fact, 97 public sector units are yet to achieve the required public float.
In 2013, Sebi raised the minimum float from 10% to 25% through two new avenues, offer for sale and institutional placement. Many listed companies had a hard time adhering to the rule and Sebi penalized more than 100 for non-compliance.
Public sector units, though, were given a deadline of August 2017, which was further extended to 2018.