Promoters have raised stake in these BSE 500 firms in Q3; should you buy?
Initial shareholding data showed that promoters have increased their stake in at least 16 BSE 500 companies during the quarter gone by.
- Jan 19, 2022,
- Updated Jan 19, 2022 2:11 PM IST
Does it make sense to chase those who have a skin in the game? Initial shareholding data showed that promoters have increased their stake in at least 16 BSE 500 companies during the quarter gone by.
Some of the companies on the list included Tanla Platforms, Balrampur Chini Mills and RHI Magnesita. Shares of Tanla Platforms have advanced 115 per cent since the beginning of the third quarter. Promoters have raised their stake to 43.74 per cent in Q3FY22 against 42.51 per cent in Q2FY22.
Likewise, shares of Balrampur Chini Mills and RHI Magnesita India have also gained over 18 per cent during the same period. Promoters of Balrampur Chini Mills have upped their stake in the company to 42.42 per cent from 41.40 per cent. On the other hand, promoters of RHI Magnesita India raised their holdings to 70.19 per cent from 66.49 per cent, data available with Ace Equity showed.
Kolkata-based investor and SEBI-registered analyst Soumya Malani said, “Rise in promoter’s stake seems a positive move since they know the business better than anyone else so it makes sense to look at a company where promoters have increased their stake.”
Therefore, promoters’ buying their stock generally is a sign of confidence shown by them on the future outlook of the business. However, an investor should dig deeper and try to understand the reason why the promoter might be increasing the stake.
“Just because a promoter has increased stake doesn’t mean that the company can be bought blindly without doing any further research. We need to understand the business of the company along with all the positive and negative triggers before we invest in the company. One factor can never be the sole reason to invest in a company. As an investor one needs to evaluate the company based on multiple factors and then make a decision by connecting the dots,” said Malani.
Promoters have also raised their stake in Aditya Birla Capital, CCL Products, Vedanta and JSW Steel for the quarter ended December 31. Shares of these companies have gained between 1 per cent and 14 per cent since September 30, 2021.
G Chokkalingam, Founder, Equinomics Research and Advisory said, “A promoter buying a significant quantum of shares in a bear market will give a lot of confidence to the public shareholders. However, in a bull market, if the valuation of concerned stock is stretched, public investors shouldn’t go blindly overboard if promoters buy especially a small holding.”
Data further highlighted that there is no guarantee of positive returns for those who chase promoters. More than 50 per cent of stocks in the list eroded investors’ wealth despite the rise in promoters’ stake in their companies.
IIFL Wealth Management, Manappuram Finance, MRF, Star Cement, Dabur India, Bajaj Auto, Advanced Enzyme Technologies, FDC and Jubilant Ingrevia stood the rest of the companies in which promoters hiked their stake in the December quarter. Shares of these companies declined between 1 per cent and 20 per cent between September 30, 2021 and January 18, 2022.
(Note: Complete shareholding data is yet to be announced.)
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Does it make sense to chase those who have a skin in the game? Initial shareholding data showed that promoters have increased their stake in at least 16 BSE 500 companies during the quarter gone by.
Some of the companies on the list included Tanla Platforms, Balrampur Chini Mills and RHI Magnesita. Shares of Tanla Platforms have advanced 115 per cent since the beginning of the third quarter. Promoters have raised their stake to 43.74 per cent in Q3FY22 against 42.51 per cent in Q2FY22.
Likewise, shares of Balrampur Chini Mills and RHI Magnesita India have also gained over 18 per cent during the same period. Promoters of Balrampur Chini Mills have upped their stake in the company to 42.42 per cent from 41.40 per cent. On the other hand, promoters of RHI Magnesita India raised their holdings to 70.19 per cent from 66.49 per cent, data available with Ace Equity showed.
Kolkata-based investor and SEBI-registered analyst Soumya Malani said, “Rise in promoter’s stake seems a positive move since they know the business better than anyone else so it makes sense to look at a company where promoters have increased their stake.”
Therefore, promoters’ buying their stock generally is a sign of confidence shown by them on the future outlook of the business. However, an investor should dig deeper and try to understand the reason why the promoter might be increasing the stake.
“Just because a promoter has increased stake doesn’t mean that the company can be bought blindly without doing any further research. We need to understand the business of the company along with all the positive and negative triggers before we invest in the company. One factor can never be the sole reason to invest in a company. As an investor one needs to evaluate the company based on multiple factors and then make a decision by connecting the dots,” said Malani.
Promoters have also raised their stake in Aditya Birla Capital, CCL Products, Vedanta and JSW Steel for the quarter ended December 31. Shares of these companies have gained between 1 per cent and 14 per cent since September 30, 2021.
G Chokkalingam, Founder, Equinomics Research and Advisory said, “A promoter buying a significant quantum of shares in a bear market will give a lot of confidence to the public shareholders. However, in a bull market, if the valuation of concerned stock is stretched, public investors shouldn’t go blindly overboard if promoters buy especially a small holding.”
Data further highlighted that there is no guarantee of positive returns for those who chase promoters. More than 50 per cent of stocks in the list eroded investors’ wealth despite the rise in promoters’ stake in their companies.
IIFL Wealth Management, Manappuram Finance, MRF, Star Cement, Dabur India, Bajaj Auto, Advanced Enzyme Technologies, FDC and Jubilant Ingrevia stood the rest of the companies in which promoters hiked their stake in the December quarter. Shares of these companies declined between 1 per cent and 20 per cent between September 30, 2021 and January 18, 2022.
(Note: Complete shareholding data is yet to be announced.)
Also Read: Paytm says Canada B2C app not material to its overall biz
Also Read: Better.com CEO Vishal Garg back after month-long sabbatical