(6) Stabilize Stock Price When Big Investor Sell Stake
It is one of the most wonderful reasons why company promoters increasing stake in a given stock. Stock market is open to attract all types of investors either big or small from both domestic & international investors.
When big investors or mutual funds starts selling their stake for any reason, the stock price is likely to decline to some extent. The fall in stock price can be even more severe during bearish market sentiments.
In such a situation, promoters often start buying those big chunks of shares. These transactions are found to occur in form of “bulk deals” in the stock exchange.
It is a wise step that is performed simply to prevent a big fall in the stock prices of the security. Thus investor’s stock portfolio is prevented from a big loss due to panic selling in the markets.
(7) Business Turnaround Ahead
It is one of the most unique reasons why company promoters increasing stake in a given script. No business can run constantly in the economy of a country. It can face several ups & downs during its journey towards becoming a successful organization.
Sometimes, an organization can face huge difficulties that can ruin its entire business. These business difficulties are clearly reflected in form of undervalued share price of the company.
Some of these organizations can go bankrupt while others can survive successfully. An organization that has just survived from serious business difficulties can show major upside in its share price anytime.
Therefore, promoters start accumulating these hidden gems at lower stock valuation. This accumulation by promoters is done constantly until others can realize true value of the stock.
Thus, investors can get a valuable hint from promoter’s shareholding pattern during such times.
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