Investor wealth eroded by Rs 2.22 lakh crore on Friday as the BSE benchmark plunged 395 points on massive selling following the Budget proposal to raise the public shareholding threshold, which stoked fears about liquidity.

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The 30-share Sensex dropped 394.67 points or 0.99 percent to close at 39,513.39.

Led by the fall in equities, the market capitalisation of BSE-listed companies plunged Rs 2.22 lakh crore to Rs 1,51 lakh crore.

Presenting the Union Budget for 2019-20, Finance Minister Nirmala Sitharaman said it was the right time to consider increasing minimum public shareholding to 35 percent from 25 percent.

"From the capital markets perspective, the increase in minimum shareholding requirement from 25 percent to 35 percent, though required in a country with limited free float, could create supply in the markets, limiting the upside," said Dhiraj Relli, MD & CEO, HDFC Securities.

"If enough time is given for achieving this, then it may have limited impact. However, India's weight in MSCI and other global indices could rise following this, leading to benefit over the medium term," Relli said.

From the 30-share pack, 24 companies fell, with Yes Bank emerging as the top loser, dropping 8.36 per cent, followed by NTPC, M&M and Vedanta.

"The big surcharge tax on high income group and possible squeezing of secondary market liquidity due to disinvestment and increased public shareholding is causing the stock market to fall today," Amar Ambani, President & Research Head, YES Securities said.

"While we need to await Sebi regulations regarding how much time will be given to these companies to meet with this minimum public shareholding norms, the overhang of this requirement of off-loading of promoter shareholding can have significant impact on the markets and the specific stocks," said Jagannadham Thunuguntla, Senior VP and Head of Research (Wealth), Centrum Broking.

At the BSE, 1,711 scrips declined and 770 advanced, while 127 remained unchanged.

First Published:Jul 5, 2019 6:18 PM IST