Promoter buying picks pace in smallcaps as stocks tumble. Here's the March list

Insider buying

Several promoters are using the recent weakness in the stock market, especially in the  mid and smallcap segments, to mop up their shares. The companies in which promoters have been buying shares include Praveg, Man Industries, Snowman Logistics, Gokul Agro Resources, Sarla Performances Fibre and Star Cement.

The Praveg stock is down 30 percent from its peak, while those of  Snowman, Gokul, Sarla and Man are down around 20 percent, and Star Cement is down less than 10 percent.

While it is early to call a trend, the situation is markedly different from a month ago when there were more instances of promoters selling shares than buying.

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Insiders buying their own shares is a much stronger signal than selling shares, market experts say. While insider selling could be for a variety of reasons, promoter buying is a good enough sign that the stock may be undervalued. Proof of that is the fact that the promoters are willing to shell out money to back their view.

At the same time, it is not a given that promoter buying always signals undervaluation. The quantum of purchases should give an idea. If the promoter is willing to invest a meaningful amount, it means the shares are undervalued. If the quantum of purchase is not huge, the promoter may be sending out a signal that the stock is undervalued.Also read 

Mid and smallcap shares have fallen sharply this month on a combination of factors. The 30-pack Sensex is down 1.53 percent this month, so far, while the BSE smallcap index has weakened by more than 8 percent and the midcap index more than 4 percent.

The Securities and Exchange Board of India's (SEBI's) warning of "froth" in small and midcap shares, mutual fund body AMFI asking its members to moderate inflows into small and midcap equity schemes, advance tax payments leading to a liquidity crunch and the Enforcement Directorate raids on entities allegedly laundering the funds of Dubai-based hawala operator HS Tibrewala, all have weighed on market sentiment.

Here is a list of companies which have seen promoter buying in March, so far:

Insider buying

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