Those flush with cash used the drop in share prices to raise stake, but the scenario has changed. With share prices heading north again, the case for increasing stake is less
compelling than it was in March, added Savla. “You might actually see...lower activity.”
The Sensex dropped 37.9 per cent to a low of 25,639 in March, compared to a December-end level of 41,254. The BSE MidCap and BSE SmallCap also showed similar declines. All three indices have since recovered. The Sensex has risen 40.5 per cent since then, and closed at 36,021 on Friday.
Pranav Haldea, MD of PRIME Database, noted that promoter stake has been on the decline since a decade, driven primarily by the minimum public shareholding requirement and greater participation by both foreign and domestic institutional investors.
The government, which is the promoter of listed public sector entities, has been steadily divesting stake in various firms. The March quarter correction marked a departure from that secular trend. “Promoters used the correction to accumulate shares and also send a signal on the companies’ intrinsic value,” he said.
Data on insiders’ trading activity, tracked by Haldea, suggests that the trend has now changed. A surge in the benchmark indices after March may have compelled many to cash in on some gains or to take advantage of higher valuations to sell stake and raise capital.
“They have been selling more than buying in the June quarter,” he noted.
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