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Promoters Raise Stake in 80 Companies. Should You Buy?

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Garnet International, Manpasand Beverages, Kitex Garments, MRF, UPL, Bajaj Holdings, Atul Auto, GMR Infra, Raymond and Ashoka Buildcon

 

Having beaten-down stocks in your portfolio might scare an investor, but for some promoters, it comes as an opportunity to accumulate their own stocks at a much lower price. A missed opportunity for some, maybe!

Bloodbath in the small & mid-cap space left many investors high and dry in 2018 and the trend seems to be continuing in 2019 as well. Data suggests that promoters used the opportunity to increase their stake not just in the last quarter, but also in the last four quarters consistently.

Promoters raised their stake consistently in as many as 80 stocks on the BSE in the last four quarters, data from AceEquity showed. As many as 62 out of 80 stocks fell up to 80 % in the last year, while only 18 gave positive returns in the same period.

Most of the stocks in the mid & small-cap space witnessed a massive sell-off in 2018, thanks to re-categorization of the schemes introduced by SEBI and corporate governance issues in some companies also spoiled the sentiment. And, persistent selling by foreign investors dried up liquidity.

Stocks in which promoters raised their stake include Garnet International, Manpasand Beverages, Kitex Garments, MRF, UPL, Bajaj Holdings, Atul Auto, GMR Infra, Raymond and Ashoka Buildcon.

Promoters raise stake in companies

AceEquity has collated a list of 16 stocks, having a market cap of over Rs 1,000 crore, in which promoters raised their stake consistently in the last four quarters:

Why do promoters raise stake in their own business?

Promoter raises stakes only when he is confident about his company’s growth prospects in the near future or they have seen a major economic expansion ahead because of the government’s well being in that particular sector

Should you buy stocks when its promoter raise stake?

Nobody knows the company better than the promoter, hence, increasing stake by the promoter is generally a good sign, but investors should also do proper due diligence before investing.

Investors should do some inquiry as to what caused the fall in the stock price. If the fall in the price is due to corporate governance issues, then investors should avoid the stock and if it was due to external factors, then they should evaluate the stock on other parameters as well before pressing the buy call.

(Note: The stocks mentioned are for reference only and not buy or sell ideas)

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