Promoters have raised stake in at least these 27 BSE 500 stocks in Q2

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.

Top stocks

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 Q2 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 you buy stocks on the basis of promoters move? 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, LIC Housing Finance, GAIL (India), Manappuram Finance, Advanced Enzyme, Adani Green Energy, MRF, Glenmark Pharma, Kaveri Seed, and Berger Paints also witnessed an increase in stake by promoters during the quarter gone by. 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.

What experts say

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 net worth of the promoters and the number of outstanding 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 realise that promoters are also 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. Also, 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 in India any increase in promoter holding is considered as a positive move. It demonstrates the faith of the promoter in their listed entity.

Stocks to buy

Brokerages are positive on a couple of stocks in which promoters have recently raised their stake. For instance, Emkay Global Financial Services has a 'Buy' call on Infosys with a target price of Rs 1,910. "We are bullish on Infosys due to strong earnings momentum and robust demand environment," Emkay said.

Likewise, 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.

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