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  1. Analysing the impact of promoter activity on stock prices

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Analysing the impact of promoter activity on stock prices

Upstox

9 min read | Updated on July 02, 2024, 17:34 IST

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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.

Tracking promoter buying can be an indicator to track

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).

Our analysis indicates that of the 29 companies in the list below, 24 saw share prices increase and almost 55% of the total outperformed the Nifty 500 index.

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 with promoter buying since March 2024
CompaniesMarket cap (₹ Crore)Transaction value (₹ Crore)% of Market cap% Change in price since buyingNIFTY 500 returns since promoter buyingRelative performance
PG Electroplast7,639.08.40.1%64.4%7.7%56.7%
Kilburn Engineering1,777.012.90.7%30.7%7.7%23.0%
Nava8,734.00.50.0%22.0%0.0%22.0%
Authum Investment17,392.045.30.3%28.8%7.7%21.1%
Deepak Fertilizers7,558.010.50.1%23.1%7.7%15.4%
STEL Holdings787.09.31.2%16.3%3.3%13.0%
Krsnaa Diagnostics1,937.02.40.1%10.5%0.0%10.5%
Marksans Pharma7,128.01.60.0%10.2%0.0%10.2%
Lincoln Pharma1,232.02.70.2%9.2%3.3%5.9%
Jindal Saw17,959.01.90.0%8.2%3.3%4.9%
Indoco Remedies3,006.024.20.8%7.8%3.3%4.5%
Manappuram Finance15,160.05.90.0%4.3%0.0%4.3%
Insolation Energy4,811.02.50.1%6.9%3.3%3.6%
SEAMEC Ltd2,720.07.40.3%2.7%0.0%2.7%
SMS Pharma.1,731.05.50.3%10.2%7.7%2.5%
D B Corp5,503.023.70.4%4.0%3.3%0.7%
Adani Enterprises3,70,244.0226.10.1%2.5%3.3%-0.9%
Cantabil Retail1,834.010.10.6%2.2%3.3%-1.1%
KPI Green Energy10,840.01.00.0%2.0%3.3%-1.3%
Sandur Manganese8,803.02.70.0%0.9%3.3%-2.4%
Snowman Logistic1,135.012.51.1%4.7%7.7%-3.1%
Shivalik Bimetals3,076.01.40.1%4.6%7.7%-3.1%
Praveg2,149.05.30.3%3.6%7.7%-4.1%
Nahar Poly474.01.80.4%2.8%7.7%-4.9%
Adani Energy Solutions1,15,604.0734.10.6%-5.2%3.3%-8.5%
Bharat Wire Ropes1,859.026.21.4%-3.6%7.7%-11.3%
Berger Paints45,623.02.00.0%-10.8%3.9%-14.7%
Nahar Spinning928.03.70.4%-9.8%7.7%-17.5%
Som Distilleries2,476.01.70.1%-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

CompaniesMarket Cap (INR in Crores)Transaction Value (₹ Crore)% of Market Cap% Change in Price since sellingNIFTY 500 Return since promoter sellingRelative performance
BGR Energy Sys.290.0126.643.6%-45.2%7.7%-52.9%
Dhruv Consultancy149.00.70.4%-24.7%7.7%-32.4%
Megasoft498.05.11.0%-22.4%3.9%-26.3%
Aditya Vision4,914.094.81.9%-19.1%3.9%-23.0%
Prime Industries318.00.60.2%-17.3%3.9%-21.2%
Bharat Road453.03.70.8%-8.6%7.7%-16.3%
Infibeam Avenues8,900.064.40.7%-8.5%3.9%-12.4%
Prozone Realty488.00.10.0%-8.0%3.9%-11.9%
SBFC Finance9,122.0259.02.8%-2.8%7.7%-10.5%
Deccan Gold Mines1,583.02.00.1%-1.7%7.7%-9.4%
Sapphire Foods9,554.037.80.4%-1.5%7.7%-9.2%
ADF Foods2,463.00.70.0%-0.5%7.7%-8.2%
Maan Aluminium765.015.32.0%0.3%7.7%-7.4%
Nettlinx273.01.80.6%0.8%7.7%-6.9%
Renaiss. Global1,007.05.30.5%-2.8%3.9%-6.7%
Nirlon3,807.093.92.5%1.1%7.7%-6.6%
Yasho Industries2,136.09.90.5%1.6%7.7%-6.1%
Sejal Glass327.05.01.5%-1.8%3.9%-5.7%
Star Housing Fin431.00.70.2%2.2%7.7%-5.5%
Indowind Energy19,507.01.70.0%-0.7%3.9%-4.6%
Sasken Technol.2,351.00.80.0%4.1%7.7%-3.6%
Power Mech Proj.7,716.01.50.0%0.8%3.9%-3.1%
Nitco525.011.32.2%4.8%7.7%-2.9%
Trident Lifeline209.00.80.4%5.2%7.7%-2.5%
Aksh Optifibre143.00.50.3%1.6%3.9%-2.3%
Taneja Aerospace1,216.00.20.0%5.8%7.7%-1.9%
Ethos Ltd6,176.0133.02.2%2.5%3.9%-1.4%
Gateway Distri5,134.05.80.1%4.0%3.9%0.1%
Markolines Pavem291.01.50.5%7.8%7.7%0.1%
ION Exchange7,766.01.30.0%4.7%3.9%0.8%
Usha Martin11,530.015.40.1%8.6%7.7%0.9%
Divi's Lab.1,17,989.02.40.0%4.9%3.9%1.0%
TransIndia Real1,071.03.70.3%7.1%3.9%3.2%
Zydus Lifesci.1,10,379.058.80.1%8.7%3.9%4.8%
Pidilite Inds.1,56,575.0118.10.1%11.8%3.9%7.9%
Silver Touch983.00.60.1%20.2%3.9%16.3%
Wardwizard Inno.1,780.02.50.1%20.7%3.9%16.8%
AAVAS Financiers15,095.01,370.09.1%29.5%7.7%21.8%
Marico81,479.020.00.0%25.9%3.9%22.0%
Mahindra & Mahindra3,47,678.01,778.00.5%46.1%7.7%38.4%
RIR Power Electr1,181.04.20.4%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.

Disclaimer: This article is for informational purposes only and must not be considered investment advice. Investors should consult with experts before making any investment decisions
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Upstox
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