Stock market hit by $11 billion exodus in 1 month. Why company insiders are cashing out now

Economic Times

04-07-2025

India's booming stock market has seen a significant $11 billion selloff by insiders and promoters in a single month, raising questions about market peaks and maturity. This exodus includes notable exits from major companies, balanced by increased investment from domestic institutions and retail investors. Experts suggest varied motivations behind the sales, from profit-taking to strategic rebalancing.
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India's soaring equity markets have triggered an exodus of insiders and promoters who have dumped a massive $11 billion worth of stocks in just one month. The unprecedented scale of selling has investors questioning whether smart money is fleeing at the peak or if India's market is mature enough to handle the selloff."Insider and promoter (majority shareholder) stake sales accelerated in May-June 2025 following the sharp rerating of the Indian market, with insiders and promoters selling Rs 95,000 crore ($11 billion) in the past one month alone," Kotak Institutional Equities said in a report.The selling wave has swept across marquee names, with large exits witnessed in Bharti Airtel Asian Paints and IndiGo over the past two months. The scale of individual transactions tells the story of a market where big players are cashing out: Vishal Mega Mart's promoter Samayat Services sold stakes worth Rs 10,220 crore, while Bajaj Finserv saw promoter stakes worth Rs 3,504 crore and Rs 2,002 crore change hands in separate transactions.Major non-strategic investors have also joined the exit parade, with BAT selling its ITC stake worth $1.5 billion and RIL offloading its Asian Paints holdings valued at $1.1 billion.The numbers reveal a fundamental shift in market dynamics. Private promoter holdings in the BSE-200 Index have declined to 37% in the March 2025 quarter from 43% in March 2021, reflecting a steady selldown in promoter stakes. Meanwhile, domestic investors have stepped up aggressively, with their combined holdings (mutual funds, banking and financial institutions, and retail) surging by 430 basis points to 25.2% from 20.9% over the same period.Foreign portfolio investors haven't been immune to the rebalancing act either, with their holdings dropping to 20.2% from 24.4% during the same timeframe."The increased supply can be seen as a stabilising force to absorb the flows coming into the capital markets. It is providing incremental avenues to the money managers to invest & keeping the price levels in check at aggregate level," said Atul Bhole, Executive Vice President and Fund Manager at Kotak Mutual Fund.But Bhole offers a nuanced perspective on the selling frenzy: "Promoters paring their stakes is an obvious signal that they are considering their shares trading at higher than fair valuations. However it needs to be seen as an additional input in an investment evaluation. There can be errors of judgement about future potential or promoters can also have different goals like diversification or other uses like charity, buying real estate etc at a particular life stage."Mihir Vora, CIO at TRUST Mutual Fund, views the supply pressure as a natural market phenomenon. "Some supply pressure is inevitable when markets rally — and to an extent, it's healthy. It improves free float and brings price discovery in names that were tightly held. In many cases, we've seen these sales met with strong institutional demand, especially from domestic mutual funds and insurers."The key question for investors is intent. "We look at the intent behind the sale. If promoters are monetizing to invest back into the business, or if PE/VC funds are exiting after long holding periods, it's not a concern. What we avoid are situations where exits are paired with governance red flags or signs of operational stress," Vora explained.Kotak's analysis suggests multiple motivations behind the selloff: "We would note that insiders and promoters may have several reasons (business strategy, group and promoter debt) for selling stakes."What's particularly striking is how retail households, channeling investments through domestic institutional investors, have emerged as the primary buyers. "It is obvious that retail households (through DIIs) have bought at the expense of FPIs and insiders," the Kotak report noted.As India's equity markets continue their remarkable ascent, the $11 billion insider exodus serves as both a reality check and a testament to the market's maturation. Whether this represents smart money taking profits at the peak or simply a healthy rebalancing act will likely determine the market's trajectory in the coming months.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)