Many mid- & small-caps see promoters raising stakes, should you invest too?

Mumbai: If a promoter raising stake in his companies is a strong signal for investors to consider betting on it, several mid- and small-cap stocks might be flashing the buy indicator. Promoters of nearly 80 mid and small-cap firms have increased their stakes through market purchases in the last two months amid the broader market rebound. Companies such as Tata Chemicals, Welspun Corp, Hatsun Agro, Just Dial, Mukand, SMS Life and Vardhman Textiles among others have seen promoters purchases recently, according to BSE data. An increase in promoter holdings is often considered a bullish signal as they are in the best position to understand the prospects of their businesses.79983860“Promoters willingness to use personal money to increase stake in their entities is a positive indicator from minority shareholders’ perspective as it reflects the management’s confidence and its growth outlook,” said Gaurav Dua, head – capital market strategy & investments, Sharekhan.Tata Sons has bought 64 lakh shares of Tata Chemicals valued at Rs 276 crore in at least four transactions in the past two months. Analysts said last month, the management guided improving demand for soda ash from all end-user segments, except the construction industry. In the previous quarter ended September, Tata Sons had increased its stake in the company from 28.51 per cent to 29.39 per cent.Promoters of Welspun Corp have purchased 40 lakh shares worth Rs 53 crore in the last two months. Analysts said the management stated that the current order book in the US is sufficient to keep the subsidiary profitable in FY21, while in India, the company is expecting a V-shaped recovery in order flows and order execution.Trident promoters acquired 6 crore shares from open market. Inexpensive valuation, strong visibility on earnings growth, falling leverage and strong dividend yield could be some of the reasons for the promoters to increase stake according to analysts.BSE’s Mid-cap and Small-cap indices have rallied 18 per cent and 20 per cent, respectively, since November 1.

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