MUMBAI (Bloomberg) — India may trigger as much as 1.9 trillion rupees ($39 billion) in stock sales, equivalent to five years of equity offerings, with a proposal to limit stakes of controlling shareholders.

Prime Minister Manmohan Singh's government is considering a plan that would require at least 25 percent of a company's stock to be traded. The rule would prompt equity sales in 560 of Mumbai's 3,335 most-active stocks, such as NMDC Ltd. and Steel Authority of India Ltd., according to data compiled by Bloomberg.

The changes may encourage foreign investment by bringing Indian regulations in line with the US, UK and Hong Kong, said Anshul Krishan, the Mumbai-based head of Goldman Sachs Group Inc.'s India financing group.

The sales, equal to about four percent of India's $1 trillion stock market, probably won't affect prices if they're staggered over time, said Purav Jhaveri, senior investment strategist at Franklin Global Advisers.

"The 25 percent minimum would be good for the long-term Indian market," Seth Freeman, chief executive officer of EM Capital Management LLC in San Francisco, which advises investors on emerging markets and runs the India Gateway Fund, said in an e-mail response to questions. "There are many very attractive companies with small floats that investors would like to be able to invest in."

The rule change would require the government to reduce dominant stakes in key industries such as steelmaking, oil and electricity supply. The top 10 companies that would have to sell stock are state-run, accounting for about 80 percent of the total by value.