An increase in stake by promoters who have skin in the game is considered as a positive sign for a stock on Dalal Street. It indicates that insiders are confident about the future prospects of the company. Initial shareholding data showed that there are at least 27 companies in the BSE 500 index in which promoters have upped their holdings for the quarter ended September 30.
With a rally of 314 per cent on a year-to-date YTD basis, Balaji Amines emerged as the top gainer in the index. Promoters raised their stake in the company to 53.70 per cent in Q 2 from 53.67 per cent in the preceding quarter. Promoters also raised their holdings in Jindal Stainless Hisar to 58.87 per cent from 58.08 per cent Jindal Stainless to 68.60 per cent from 68.12 per cent and Welspun India to 70.36 per cent from 70 per cent Shares of these companies have rallied between 123 per cent and 135 per cent since January 2021.
Should I buy stocks on the basis of the move of promoters? Market mavens believe that investors should do a case-by-case study of the business and its future prospects which picking a stock and promoter buying is one of the factors you should watch in that.
Data further highlighted that companies like Grasim Industries, JSW Steel, Adani Ports, Indoco Remedies, Maharashtra Seamless, CESC, Bajaj Holdings, Aditya Birla Fashion, Tanla Platform, Atul Ltd, Orient Electric, Shriram Transport Finance, Infosys, Navneet Education, GAIL India Manappuram Finance, Advanced Enzyme, Adani Green Energy, MRF, Glenmark Pharma, Kaveri Seed, and Barring Berger Paints down 1.26 per cent shares of other stocks have advanced between 1 per cent and 89 per cent on a year-to-date basis.
Market watchers believe that an increase in promoter holding is an important aspect to study. However, Abhishek Basumallick, chief equity advisor, Intelsense Capital said, One should keep two things in mind while chasing promoters. Firstly, the quantum of buying in relation to the outstanding net worth of the promoters and the number of net shares. If the buying quantity is very small, then it can be ignored as a lot of promoters use this as a signalling mechanism to the markets. Secondly, you also need to realize that promoters are human with their own biases. Sometimes, they are more comfortable buying something that they own and understand if it is not the optimum investment choice. At times, promoters become too optimistic about their own prospects and ignore risks that are visible to outsiders. So, like in everything related to investing, there is no clear answer. Kranthi Bathini, strategist at Mumbai-based consultancy WealthMills Securities, added that any increase in promoter holding is considered as a positive move in India. It demonstrates the faith of the promoter in their listed entity.
Brokerages are positive on a couple of stocks in which promoters raised their stake recently. For instance, Infosys has a 'Buy' call on Emkay Global Financial Services with a target price of Rs 1,910. We are bullish on Infosys due to robust earnings momentum and strong demand environment, Emkay said.
Similarly, Edelweiss Securities recently retained a 'Buy' call on Adani Ports with a target price of Rs 875. We believe volume growth momentum is likely to sustain and Adani Ports' scale, leadership, and extended gate operations should enable it to exploit the opportunity, the brokerage said.
Also Read: India can smoothly implement T-1 settlement cycle, says BSE chief Ashishkumar Chauhan.
Also Read: M-cap of BSE-listed companies touches a fresh record high of over Rs 270.24 lakh crore.