Bringing back open-market buybacks through stock exchanges is the right decision

India's markets regulator has cleared a path for listed companies to repurchase shares through open-market purchases on stock exchanges, a practice that was effectively sidelined after 2018 when the Securities and Exchange Board of India mandated a tender-offer route for most buybacks. The shift back matters because it changes who gets paid and how fast.

Under the tender-offer structure, a company had to buy back a fixed number of shares at a fixed price from all willing shareholders on a pro-rata basis. That protected small holders but made execution slow and unpredictable. Open-market buybacks let a firm buy in the secondary market at prevailing prices, which gives management discretion over timing and quantity. Traders said the new framework restores a tool that institutional investors had missed, especially for large-cap names where liquidity is deep enough to absorb buyback flow without distorting the stock.

The naive read is that anything that reduces share count is good for earnings per share. The better market read is about the signal vs. the execution risk. A tender-offer buyback guarantees the stock price floor at the offer price, so it attracts arbitrageurs. Open-market buybacks don't offer that; they rely on the company's own buying discipline. If a firm announces a ₹10,000 crore buyback but buys only ₹3,000 crore because the stock never falls to the level it considers cheap, the market sees the shortfall as a negative signal. The right framework is the one that aligns with the company's actual capital allocation discipline, not the one that looks best on the press release.

For technology stocks, the readthrough is direct. Infosys (INFY) and Wipro (WIT) have used buybacks historically to return cash and support valuations during sector downturns. Infosys, with an Alpha Score of 57/100 labeled Moderate, faces slowing revenue growth and a stock that has lagged the Nifty IT index by 8% over the past quarter. An open-market buyback gives its management room to time purchases when the currency or client-spending headwinds hit hardest. Wipro, with an Alpha Score of 46/100 labeled Mixed, has thinner margins and a larger overhang from the old tender-offer commitments. The new route lets it retire stock without the optics of a failed tender.

Banks will also benefit. HDFC Bank (HDB), Alpha Score 43/100 and labeled Mixed, has been the largest private-sector lender by market cap but has seen its share price drift as the merger transition consumed management bandwidth. Open-market buybacks would let it defend the stock when the bank's own valuation math says it's cheap, rather than committing to a fixed price months in advance. The decision to bring back the exchange-based method gives boards the flexibility they need in a market where liquidity and volatility are the real constraints, not the rulebook.

The final question is implementation. The regulator still requires a special resolution and a ceiling on buyback volume. Those guardrails keep the tool from turning into a price-support crutch. For traders, the effective date of the new norms will be the next catalyst to track. No date has been set for a floor vote.

For more on the broader market impact, see our stock market analysis and the detailed profiles of Infosys and Wipro.