India Stocks Dive to Prompt Company Owners to Repurchase Shares
(Bloomberg) -- India Inc. may see a busy year for share buybacks as the sell-off in local stocks is nudging company owners to step in to support sentiment.
“Companies announcing buybacks tend to increase whenever the market enters a bearish phase,” said Pranav Haldea, managing director at PRIME Database. “If current market conditions prevail, we shall see a lot of buybacks this year as well.”
A global wave of risk aversion led by the novel coronavirus pandemic has seen overseas investors dump emerging market stocks, bonds and currencies. In India, the benchmark equity index, the S&P BSE Sensex is trading at a three-year low after falling 32% this year. March added to the bulk of its losses after the nation saw a surge in people affected by the virus.
Sterlite Technologies Ltd. has said that it will consider repurchasing shares on March 24. The shares of the company on Thursday jumped 9.3%, the most in over three months. Consumer company Emami Ltd. has also announced the repurchase of 1.9 billion rupees ($25.8 million) of shares.
A total of seven companies have bought back shares worth 12.9 billion rupees up until March 16, according to data compiled by PRIME Database, which tracks such transactions. Buybacks made 2019 a banner year with 69 companies spending more than 435 billion rupees to repurchase stock as it was a more tax-efficient way to return excess cash to shareholders than dividends, Haldea said. The record run ended after the government in June decided to tax the transactions.
“Buybacks send a strong signal to the investors,” Haldea said. “However, it is unlikely that, even if a bunch of buybacks is announced, it would be able to stop the current mayhem in the market.”
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