Promoters can increase or decrease their stake anytime. These factors to consider when analyzing promoter’s stake change to get maximum benefits.
Promoters are the key shareholders of any company. Like ordinary investors, they also perform buy & sell transactions to change their stock portfolio.
There actions dictate a lot of things about their own mindset & future growth prospects of a company. Investors need to act smartly & cautiously when such big transactions are taking place.
According to a post published in Business Today, an increase in stake by promoters is seen as positive for the stock price.
On the other hand, a decrease in stake by promoters is seen as negative for the stock price. But, every transaction is not equivalent to each other. They can also have opposite effects on the share price of a company. Thus, you need to consider various factors before coming to any conclusion. Here are 10 factors or parameters to consider for analyzing promoters shareholding pattern:
[You can also watch an exciting video on this post from GetUpWise channel on YouTube.]
(1) Quantity Involved In Promoter’s Stake Change
It is one of the most important factors to consider when analyzing promoter’s stake change. Every transaction is not a big & valuable transaction in stock markets. Sometimes, shares are sold or brought bought in less quantity even by big investors such as promoters.
For example, one or more promoters holding 60% stake is increasing or decreasing stake by only 1% through open markets. These types of little transactions don’t have any major impact on the share price of the company as well as overall portfolio of promoters in the long run.
Although, it can have some short term positive or negative impact on the share price of the company depending on volatility & market sentiments.
On the other hand, one or promoters increasing or decreasing stake by 10 to 15% of his/her portfolio can have long term impact on the share price. Thus, investors should always look toward the quantity of shares bought or sold by promoters to analyze its long term impact.
Image Source: Shutterstock