Stocks: Promoter, FI buying in these stocks suggests more strength

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Mumbai: Promoters or insiders who increase their stake in companies are generally regarded as a reliable indicator of the prospects of the company and its actions. So when large institutional investors also follow suit, bullish signals only get stronger. About a dozen domestic companies during the March quarter saw a simultaneous increase in the holdings of promoters, domestic mutual funds and foreign portfolio investors.

For example, developers, REITs and mutual funds have increased their stake in CG Power, which is in the process of being reorganized with the Murugappa group entity.

intervene with an infusion of 800 crores and take a majority stake. CG Power held a market leadership position in both the ultra-high voltage transformer and industrial product portfolios, but the stock had come under pressure due to corporate governance issues involving the former group of promoters.

Likewise, all three categories of investors have increased their participation, as analysts see good prospects for the company due to market share gains, a stronger focus on non-plastic furniture, a increasing industrial activity and deeper e-commerce penetration.

Promoters and institutional shareholders have also increased their

, which should benefit from the favorable dynamics of the Indian specialty chemicals sector supported by the China Plus One strategy by global companies. The stock should be reassessed based on a strong balance sheet, growth prospects and effective capital management.

Other companies in which developers, REITs and MFs have increased their stake include two brokerage firms –

and IIFL Securities – which are the beneficiaries of increasing activity in the stock market. As retail investors traded a variety of securities like never before in recent months, the profits of various large investment dealers more than doubled in the year21, thanks to revenue growth of 50 to 75% despite challenges of stricter initial margin standards.

Analysts said that while promoters and large investors buying stocks are good indicators, investors should be wary of piggybacking, especially in stocks with high valuations. These companies can be stable, but they don’t have to translate into stock returns immediately.



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