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Analysing the impact of promoter activity on stock prices
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9 min read | Updated on July 02, 2024, 17:34 IST
SUMMARY
Our analysis indicates that tracking promoter buying and selling activity could aid traders in making their decisions. Almost 55% of the companies that saw promoter buying were able to outperform the broader market and 66% of the companies that witnessed selling underperformed the broader market.
NIFTY50 caps range-bound week with record high close, poised for further gains
Traders typically look for events that could trigger some movements in stocks. One such key event is change in promoter holdings in a company. Promoters' tendency to increase stakes under various market conditions offers insights into their investment strategies and market sentiments.
In this article, we take a deeper look at some of the major recent promoter share purchases and sales and the corresponding movement in share prices.
Why does promoter buying matter?
Here are some of the reasons why promoter buying matters.
- Confidence: Confidence in the company's prospects, signalling to external investors that the company may be undervalued or poised for growth.
- Capital infusion: To inject capital into the company, especially during financial distress or for expansion and strategic initiatives.
- Strategic initiatives: Investing additional capital will enable the company to grow and succeed in the long term, reflecting a bullish outlook.
- Turnaround signal: A commitment to navigating challenges and steering the company toward a potential turnaround during difficult times.
- Avoid takeovers: Increasing stake helps fortify the company against hostile takeover attempts or external control.
How to track promoter buying?
Promoter buying and selling can be tracked regularly from the NSE and BSE websites.
Promoter activity Indicates possible trend in the stock
Generally, investors see Promoters increasing their Holdings as they are bullish about their company. In contrast, a fall in promoter holding is usually seen as a negative development. Here is a list of companies where promoter buying has occurred since March 2024 until now (where promoter buying from open market is more than ₹1 Crore).
Since the list includes companies across market capitalisation, we have used the Nifty 500 for comparison purposes. The Nifty 500 is a broad-based index containing top 500 listed companies, representing ~96.1% of free float market capitalisation on the NSE.
| Companies | Market cap (₹ Crore) | Transaction value (₹ Crore) | % of Market cap | % Change in price since buying | NIFTY 500 returns since promoter buying | Relative performance |
|---|---|---|---|---|---|---|
| PG Electroplast | 7,639.0 | 8.4 | 0.1% | 64.4% | 7.7% | 56.7% |
| Kilburn Engineering | 1,777.0 | 12.9 | 0.7% | 30.7% | 7.7% | 23.0% |
| Nava | 8,734.0 | 0.5 | 0.0% | 22.0% | 0.0% | 22.0% |
| Authum Investment | 17,392.0 | 45.3 | 0.3% | 28.8% | 7.7% | 21.1% |
| Deepak Fertilizers | 7,558.0 | 10.5 | 0.1% | 23.1% | 7.7% | 15.4% |
| STEL Holdings | 787.0 | 9.3 | 1.2% | 16.3% | 3.3% | 13.0% |
| Krsnaa Diagnostics | 1,937.0 | 2.4 | 0.1% | 10.5% | 0.0% | 10.5% |
| Marksans Pharma | 7,128.0 | 1.6 | 0.0% | 10.2% | 0.0% | 10.2% |
| Lincoln Pharma | 1,232.0 | 2.7 | 0.2% | 9.2% | 3.3% | 5.9% |
| Jindal Saw | 17,959.0 | 1.9 | 0.0% | 8.2% | 3.3% | 4.9% |
| Indoco Remedies | 3,006.0 | 24.2 | 0.8% | 7.8% | 3.3% | 4.5% |
| Manappuram Finance | 15,160.0 | 5.9 | 0.0% | 4.3% | 0.0% | 4.3% |
| Insolation Energy | 4,811.0 | 2.5 | 0.1% | 6.9% | 3.3% | 3.6% |
| SEAMEC Ltd | 2,720.0 | 7.4 | 0.3% | 2.7% | 0.0% | 2.7% |
| SMS Pharma. | 1,731.0 | 5.5 | 0.3% | 10.2% | 7.7% | 2.5% |
| D B Corp | 5,503.0 | 23.7 | 0.4% | 4.0% | 3.3% | 0.7% |
| Adani Enterprises | 3,70,244.0 | 226.1 | 0.1% | 2.5% | 3.3% | -0.9% |
| Cantabil Retail | 1,834.0 | 10.1 | 0.6% | 2.2% | 3.3% | -1.1% |
| KPI Green Energy | 10,840.0 | 1.0 | 0.0% | 2.0% | 3.3% | -1.3% |
| Sandur Manganese | 8,803.0 | 2.7 | 0.0% | 0.9% | 3.3% | -2.4% |
| Snowman Logistic | 1,135.0 | 12.5 | 1.1% | 4.7% | 7.7% | -3.1% |
| Shivalik Bimetals | 3,076.0 | 1.4 | 0.1% | 4.6% | 7.7% | -3.1% |
| Praveg | 2,149.0 | 5.3 | 0.3% | 3.6% | 7.7% | -4.1% |
| Nahar Poly | 474.0 | 1.8 | 0.4% | 2.8% | 7.7% | -4.9% |
| Adani Energy Solutions | 1,15,604.0 | 734.1 | 0.6% | -5.2% | 3.3% | -8.5% |
| Bharat Wire Ropes | 1,859.0 | 26.2 | 1.4% | -3.6% | 7.7% | -11.3% |
| Berger Paints | 45,623.0 | 2.0 | 0.0% | -10.8% | 3.9% | -14.7% |
| Nahar Spinning | 928.0 | 3.7 | 0.4% | -9.8% | 7.7% | -17.5% |
| Som Distilleries | 2,476.0 | 1.7 | 0.1% | -20.0% | 7.7% | -27.7% |
Source: Screener; Data as of 10th June-24
Here is a list of companies where promoter selling has occurred since March 2024 until now. Our analysis indicates that 66% of the companies underperformed the Nifty 500 since the time of promoter selling.
Companies with promoter selling since March 2024
| Companies | Market Cap (INR in Crores) | Transaction Value (₹ Crore) | % of Market Cap | % Change in Price since selling | NIFTY 500 Return since promoter selling | Relative performance |
|---|---|---|---|---|---|---|
| BGR Energy Sys. | 290.0 | 126.6 | 43.6% | -45.2% | 7.7% | -52.9% |
| Dhruv Consultancy | 149.0 | 0.7 | 0.4% | -24.7% | 7.7% | -32.4% |
| Megasoft | 498.0 | 5.1 | 1.0% | -22.4% | 3.9% | -26.3% |
| Aditya Vision | 4,914.0 | 94.8 | 1.9% | -19.1% | 3.9% | -23.0% |
| Prime Industries | 318.0 | 0.6 | 0.2% | -17.3% | 3.9% | -21.2% |
| Bharat Road | 453.0 | 3.7 | 0.8% | -8.6% | 7.7% | -16.3% |
| Infibeam Avenues | 8,900.0 | 64.4 | 0.7% | -8.5% | 3.9% | -12.4% |
| Prozone Realty | 488.0 | 0.1 | 0.0% | -8.0% | 3.9% | -11.9% |
| SBFC Finance | 9,122.0 | 259.0 | 2.8% | -2.8% | 7.7% | -10.5% |
| Deccan Gold Mines | 1,583.0 | 2.0 | 0.1% | -1.7% | 7.7% | -9.4% |
| Sapphire Foods | 9,554.0 | 37.8 | 0.4% | -1.5% | 7.7% | -9.2% |
| ADF Foods | 2,463.0 | 0.7 | 0.0% | -0.5% | 7.7% | -8.2% |
| Maan Aluminium | 765.0 | 15.3 | 2.0% | 0.3% | 7.7% | -7.4% |
| Nettlinx | 273.0 | 1.8 | 0.6% | 0.8% | 7.7% | -6.9% |
| Renaiss. Global | 1,007.0 | 5.3 | 0.5% | -2.8% | 3.9% | -6.7% |
| Nirlon | 3,807.0 | 93.9 | 2.5% | 1.1% | 7.7% | -6.6% |
| Yasho Industries | 2,136.0 | 9.9 | 0.5% | 1.6% | 7.7% | -6.1% |
| Sejal Glass | 327.0 | 5.0 | 1.5% | -1.8% | 3.9% | -5.7% |
| Star Housing Fin | 431.0 | 0.7 | 0.2% | 2.2% | 7.7% | -5.5% |
| Indowind Energy | 19,507.0 | 1.7 | 0.0% | -0.7% | 3.9% | -4.6% |
| Sasken Technol. | 2,351.0 | 0.8 | 0.0% | 4.1% | 7.7% | -3.6% |
| Power Mech Proj. | 7,716.0 | 1.5 | 0.0% | 0.8% | 3.9% | -3.1% |
| Nitco | 525.0 | 11.3 | 2.2% | 4.8% | 7.7% | -2.9% |
| Trident Lifeline | 209.0 | 0.8 | 0.4% | 5.2% | 7.7% | -2.5% |
| Aksh Optifibre | 143.0 | 0.5 | 0.3% | 1.6% | 3.9% | -2.3% |
| Taneja Aerospace | 1,216.0 | 0.2 | 0.0% | 5.8% | 7.7% | -1.9% |
| Ethos Ltd | 6,176.0 | 133.0 | 2.2% | 2.5% | 3.9% | -1.4% |
| Gateway Distri | 5,134.0 | 5.8 | 0.1% | 4.0% | 3.9% | 0.1% |
| Markolines Pavem | 291.0 | 1.5 | 0.5% | 7.8% | 7.7% | 0.1% |
| ION Exchange | 7,766.0 | 1.3 | 0.0% | 4.7% | 3.9% | 0.8% |
| Usha Martin | 11,530.0 | 15.4 | 0.1% | 8.6% | 7.7% | 0.9% |
| Divi's Lab. | 1,17,989.0 | 2.4 | 0.0% | 4.9% | 3.9% | 1.0% |
| TransIndia Real | 1,071.0 | 3.7 | 0.3% | 7.1% | 3.9% | 3.2% |
| Zydus Lifesci. | 1,10,379.0 | 58.8 | 0.1% | 8.7% | 3.9% | 4.8% |
| Pidilite Inds. | 1,56,575.0 | 118.1 | 0.1% | 11.8% | 3.9% | 7.9% |
| Silver Touch | 983.0 | 0.6 | 0.1% | 20.2% | 3.9% | 16.3% |
| Wardwizard Inno. | 1,780.0 | 2.5 | 0.1% | 20.7% | 3.9% | 16.8% |
| AAVAS Financiers | 15,095.0 | 1,370.0 | 9.1% | 29.5% | 7.7% | 21.8% |
| Marico | 81,479.0 | 20.0 | 0.0% | 25.9% | 3.9% | 22.0% |
| Mahindra & Mahindra | 3,47,678.0 | 1,778.0 | 0.5% | 46.1% | 7.7% | 38.4% |
| RIR Power Electr | 1,181.0 | 4.2 | 0.4% | 99.6% | 3.9% | 95.7% |
Source: Screener; Data as of 10th June 2024
What’s the insight for traders?
Promoter buying and selling is one of the indicators that could be tracked to give insights on the possible trend of the stock. That said, it is one of the many indicators that should be analysed before making a decision.
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