Promoter Holding Change – 3M is calculated as the difference between the current promoter ownership percentage and the percentage 3 months ago. Analysing promoter ownership change is tricky as a lot of factors have to be considered before deciding on whether the change is positive or negative for the company.

  • If the promoter is selling off stake when the company is reporting poor fundamentals, it means that the entity has lost hope in the future of the company. A promoter entity increasing stake in the company when share prices are falling either due to weak market conditions or poor fundamentals usually signifies that the long-term potential of the company is strong and that share price fall is a temporary phenomenon.
  • A marginal stake dilution to bring in other promoter partners is usually seen as positive endorsement of the company. For example, real estate company DLF recently sold 40% stake in a subsidiary company to GIC of Singapore. Markets reacted positively to the news.
  • A marginal stake dilution when promoter entity has very high holding is considered positive, as the number of shares freely available to buy and sell increases.
  • If the promoter entity increases stake in the company via market purchase route or preferential allotment at market price or above market price, it is considered positive for the stock.