Stock Markets To See Liquidity Pressure In The Coming Weeks

Indian markets may see liquidity pressure in the coming weeks and for it to sustain at current levels, there must be some decent inflows from Foreign Portfolio Investors (FPIs).

Last week, GlaxoSmithKline Plc said it has sold its 5.7% stake in fast moving consumer goods (FMCG) major, Hindustan Unilever Ltd (HUL), for Rs 25,480 crore. This was the largest secondary sale on the stock exchanges.

The sum is by no means small and several institutions were said to have participated in the same.

Apart from this, there is the Reliance Industries rights issue, which is also of a massive size of Rs 53,125 crores, will put pressure on liquidity. The record date for the same has been fixed as May 14.

"We inform you that the Rights Issue Committee constituted by the Board of Directors of the Company has, at its meeting held today, fixed Thursday, May 14, 2020 as the 'Record Date' for the purpose of determining the equity shareholders entitled to receive the rights entitlement in the rights issue ("Eligible Shareholders")," RIL said in a filing to stock exchanges.

One is not sure when the rights issue will open, but, this too is expected to result in much liquidity being pulled away.

According to reports there is news that the government would this week, sell its stake in ITC and Axis Bank.

The government held stakes in these companies through Specified Undertaking of the Unit Trust of India (SUUTI), which owns 7.94 per cent in ITC and 4.69 per cent in Axis Bank, as on March 31, 2020. This is expected to raise around Rs 22,000 crores for the government.

So, the amount of money that would be needed for the Reliance rights issue and the government stake sale in ITC and Axis Bank is almost Rs 75,000. This is apart from the amount of Rs 25,000 crores raised by GlaxoSmithKline Plc for a stake sale in Hindustan Unilever.

So, unless there is some massive inflows through FPIs, it may put some pressure on stocks.