Promoters of as many as 12 companies, foreign institutional investors (FII) and mutual fund houses simultaneously raised stakes in a dozen stocks all through the painful September quarter in clear signals that these stocks had become good value propositions.
Domestic stocks bled all through the quarter amid a slew of market-unfriendly announcements from the government and adverse cues, including fears of a global recession.
BSE Sensex declined 2.57 per cent during the quarter, while the broader BSE Midcap and Smallcap indices slid over 5 per cent each. The equity benchmarks have witnessed a smart recovery in recent weeks and now trade very close to their all-time highs.
Insiders increasing stake in a company is usually considered a positive signal for investors. And when FIIs, DIIs and promoters all buy a stock simultaneously, it may signal something favourable for the stock.
Stocks that saw a similar trend during the September quarter included WiproNSE -0.27 %, La Opala RG, Atul, Advanced Enzyme Technology and Lemon Tree Hotels, among others.
Wipro promoters raised their stake to 73.04 per cent at the end of September from 73.83 per cent at the end of June. Mutual funds raised their holdings on the counter from 1.21 per cent to 1.27 per cent and FPIs from 8.24 per cent to 8.35 per cent.
IT services firm Wipro recently posted a 35 per cent increase in consolidated net profit at Rs 2,552.7 crore for the September quarter against Rs 1,889 crore profit reported for the year-ago period. Total income for the quarter stood at Rs 15,875.4 crore against Rs 15,203.2 crore reported a year ago.
Brokerages hold a positive view on a couple of stocks in the list. Centrum Broking has an ‘add’ rating on Wipro with a price target of Rs 270. Anand Rathi Financial Services has a ‘buy’ rating on Lemon Tree Hotels with a price target of Rs 72.
“The risk-reward is now favourable in Lemon Tree Hotels,” the brokerage said in a report.
Alembic is another stock on the list. The promoters held 66.31 per cent in the company as of September 30, 2019 against 65.22 per cent on June 30, 2019. Shareholding of mutual funds and foreign institutional investors (FII) also increased to 5.84 per cent and 1.89 per cent, respectively, from 5.71 per cent and 1.29 per cent.
Among others, Tube Investments, MuthootNSE 0.21 % Capital, Galaxy Surfactants, Alkem Laboratories and GMR Infrastructure also witnessed a simultaneous rise in shareholdings by promoters, MFs and FPIs during September quarter.
Atul, Alkem Laboratories and Galaxy Surfactants were among the Samvat 2076 picks of Inventure Growth and Securities. The brokerage has a price target of Rs 2,547 for Alkem Labs, Rs 5,625 for Atul and Rs 1,505 for, Galaxy.
Seven stocks on the list have delivered positive returns to investors on a year-to-date basis till October 29. Galaxy Surfactants, GMR Infra, Atul, Tube Investment, Alembic, Wipro and Alkem Labs have all gained up to 27 per cent.
On the other hand, Muthoot Capital, La Opala RG, Lemon Tree Hotels, Apar Industries and Advanced Enzymes have declined between 2 per cent and 52 per cent during this period.
Market veterans say investors should not follow the buying and selling patterns of promoters or institutional investors blindly. One should understand the reason behind their decisions and go through a company’s financials and commentaries to figure out their future plans.