>Higher stipulated threshold for public shareholding to cap performance (JP MORGAN)

■ Government raises threshold for public shareholding in listed companies: The Indian government today amended the Securities Contracts (Regulation) Rules, making it mandatory for listed companies to have a minimum public holding of 25%.

■ At current market prices, the policy would entail selling down of equities aggregating US$32bn: Of this, at least US$13B will have to be raised over the next 12 months, given the stipulation of at least a 5% increase in public shareholding every year to get to the target.

■ State-owned companies to dominate equity offerings. In terms of promoter groups: a) the government of India will have to raise the lion's share, US$27bn, b) followed by the Indian private sector at US$4 bn. c) Multinational companies will have to raise a nominal US$600 m to

comply. We would not be surprised to see some of the MNCs to take the companies private and de-list.

■ Supply overhang to check performance: We estimate the current equity issuance pipeline for the next 12 months at about US$35 bn. Of which govt. divestments are expected to account for about US$10 bn. During the past, equity issuances in India have averaged about 2% of outstanding market cap every year. The change in regulation, coupled with the capital intensive phase that the Indian economy is in, implies that over the medium term equity issuances as a percentage of outstanding market cap could average 3-5%.

■ Global risk appetite becomes even more important: The amount to be raised this year is not daunting in comparison to peer group markets over the last decade. Global risk appetite will, however, have to be supportive, given India's over-dependence on external capital.

To read the full report: EQUITY STRATEGY