Stock Market

Game plan or real optimism Selloff sends 43 promoters stock picking

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NEW DELHI: June quarter turned out to be a period of painful wealth destruction for investors on Dalal Street, but promoters of 43 BSE500 companies –barring PSU banks – took advantage of the price correction to increase their holdings. Analysts say promoter raising stake in a company provides a certain degree of comfort to market participants.

However, that is just one tick on the boxes while selecting a stock, they caution. Data from Ace Equity showed shares of over 70 per cent companies, where promoters increased their holdings during the quarter, saw a correction during the quarter. Among the companies in which promoter holding went up during the quarter, eClerx Services, Escorts, Glenmark Pharma, Vodafone Idea, GMR Infrastructure, Eris Lifesciences and Sterlite Technologies saw their shares slip 20-34 per cent while Sequent Bajaj Finance, Bajaj Finserv, Zensar Technologies, Rajesh Exports, Shoppers Stop, NTPC, Meghmani Organics, APL Apollo Tubes and Can Fin Home registered gains of 3-23 per cent. “Investors should not follow anyone blindly, even if they are promoters or large institutional investors.

The promoters’ objective could be very different from that of an ordinary retail investor.

Promoters increasing stake should only act as a catalyst in one’s investment decision,” said Ambareesh Baliga, an independent market analyst. Companies like NIIT Technologies, Bajaj Finance, DLF, Bajaj Auto, Bajaj Finserv, Jindal Steel and Power and Persistent Systems witnessed a substantial rise in promoters’ holding during the quarter. Likewise, promoters raised their stake from 49.03 per cent to 49.56 per cent in Bajaj Holdings, from 57.96 per cent to 57.52 per cent in TV Today Network and from 63.54 per cent to 63.22 per cent in GMR Infrastructure. “It is not sufficient to simply rely on promoter buying to own a stock.

Yes, it could give some comfort to investors.

But it should be supplemented by other factors like valuations, size of leveraging, outlook for the business, and one also needs to check whether the management is a time-tested one,” said G Chokkalingam, Founder, Equinomics Research and Advisory. Buying in a handful of largecap stocks took BSE benchmark Sensex 2.20 per cent higher to 39,395 on June 28, 2019 from 38,546 on March 28.

However, the BSE Midcap and Smallcap indices dipped 3.40 per cent and 4.55 per cent, respectively, during the same period. “If you are planning to chase promoters in this market, we should remember that promoters too are a smart lot.

There is a need to check whether they are trying to beat investors at their own game.

In a market like this, one should look for positive cash flow of the business before even looking at any other parameter,” said Baliga. In the BSE500 index, Natco Pharma, Trident, Gateway Distriparks, Cyient, Indostar Capital Finance, Thyrocare Technologies, Infosys, Nava Bharat Ventures and Maharasthra Seamless were among the stocks that saw promoter stake go up during the quarter.




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