Promoter Buying Amid a Bear Market: A Sign of Confidence in Cooling Valuations?

When promoters buy their own company’s shares during a downturn, it tends to spark curiosity—and often, optimism—in the investor community. As part of this special story, Abhishek Wani breaks down the recent trends in promoter buying across key sectors, decodes what management commentary reveals about the road ahead, and helps investors separate conviction from noise 

The Indian equity markets, after a euphoric post-COVID bull run that stretched till September 2024, have now entered a phase of correction. What many are calling a bear market is marked by falling stock prices, cautious investor sentiment, and increasing volatility. Yet amid this broader negativity, there’s a quiet but meaningful trend playing out: promoter buying. 

Promoters, for those unfamiliar with the term, are the founders, core executives, or major stakeholders who run and influence a company. They’re the people with the most intimate understanding of a business’s inner workings, its challenges, its strengths, and most importantly, its true worth. So when these insiders start increasing their stake in their own companies during a market downturn, it’s a signal worth paying attention to. 

After the wild rush of retail participation and IPO mania during the bull market, many investors are now left licking their wounds as valuations have cooled off. The same companies that were once soaring at all-time highs are now down 30-50 per cent from their peaks. In this gloom, it’s interesting—and telling—to see promoters quietly stepping in to buy more of what they already own. 

So what does this mean? Simply put, promoter buying is often seen as a vote of confidence. It signals that those who know the company best believe the market is undervaluing their business. Think of it this way: if you owned a shop and knew its potential was being overlooked due to temporary issues— maybe a bad quarter or a weak market—you’d probably take the opportunity to buy back a larger share at a lower price. That’s exactly what we’re seeing. 

In the three months between October and December 2024, an analysis of companies with market capitalisation more than `200 crore revealed that promoters in 52 firms increased stake in their company by at least 1 per cent. This follows the sharp decline in prices that began right after September 2024. Interestingly, this trend gained pace even as retail investors grew more cautious. Many exited positions amid fears of further downside. But promoters did the opposite—they bought. 

Now, let’s rewind a bit. During the bull market that raged from mid-2020 to late 2024, we saw a very different trend: promoters’ selling. And they did so in a variety of ways—through IPOs, FPOs, preferential allotments, and qualified institutional placements (QIPs). It wasn’t unusual to see founders offloading a portion of their holdings during this phase. Was this unethical? Not at all. Promoters, just like any other investor, look to maximise returns. And the bull market gave them a golden opportunity to exit at the best possible prices, with valuations soaring beyond fair value. 

But just as promoter selling during a boom is natural, so is promoter buying in a downturn. It’s the mirror image of the same cycle. Promoters know their business better than anyone else. They understand when their company’s valuation becomes expensive and when it turns attractive. So, when they start buying in a bear market, it usually means they believe the stock is undervalued and the long-term potential remains strong. 

Still, it’s important not to romanticise this trend. Just because a promoter is buying doesn’t mean the stock will rise immediately. In fact, in the recent data, many of the stocks where promoters increased their stake have continued to underperform the broader market. While the BSE 500 returned 12.12 per cent over the past six months, and the Sensex posted 8.40 per cent, a majority of these 'promoter-backed' stocks lagged behind. Some even recorded negative returns. 

This disconnect between insider optimism and short-term stock performance can be explained by ongoing sector-specific challenges—weak demand in some industries, rising input costs, and global economic uncertainties that are yet to ease. Promoters might be taking a long-term view, but the market isn’t ready to price in that optimism just yet. 

The Role of Promoters in Long-Term Value Creation
Promoters play a foundational role in shaping a company’s future trajectory. Unlike institutional investors or analysts, who rely on quarterly earnings and forward guidance, promoters have a continuous view of the company’s inner workings. Their decisions to buy or sell shares reflect not just their confidence in the stock price but their belief in the business’s intrinsic value. 

In India, where corporate governance has evolved significantly over the past decade, promoter activity is being watched more closely than ever. When promoters buy shares during market corrections, it’s often not a speculative trade—it’s a long-term bet on the future. And while SEBI regulations require promoters to disclose significant purchases, even minor increases in holding can be meaningful when interpreted in the context of valuations and industry cycles. 

Who Are Promoters, and Why Their Moves Matter
The key differentiator between promoters and other investors is access. Promoters are deeply embedded in the operational and strategic layers of a business. They see not just what is, but what’s coming—be it an upcoming product launch, a regulatory tailwind, or a structural margin expansion. This informational edge makes their investment behaviour especially telling. 

For retail and institutional investors alike, tracking promoter behaviour becomes a valuable addition to the research toolkit. A rising promoter stake could be a cue to dig deeper into the company’s fundamentals and assess whether the pessimism in price is disconnected from the reality on the ground. 

Promoters Understand Their Business Like No One Else
Promoters are business builders. They understand the company’s revenue drivers, cost levers, and scalability. Their confidence (or lack thereof) is shaped by a multitude of factors that aren’t immediately apparent in a quarterly presentation or an investor call. 

Their knowledge advantage spans across:

• Growth Visibility
• Operational Health
• Macro and Regulatory Landscape
• Strategic Shifts Because of this intimate knowledge, their buying behavior often front-runs actual performance by quarters, sometimes years. 
   

Valuing the Business Beyond Stock Price
Unlike fund managers who are benchmarked quarter to quarter, promoters tend to evaluate their businesses on intrinsic parameters as opposed to momentary price action. This long-termism shapes their valuation models. Importantly, promoters may buy even when the broader market is jittery if they believe their stock trades at a meaningful discount to its long-term value. 

Buying in Bear Markets: Promoters’ Contrarian Bet
A consistent theme across cycles is that promoters tend to accumulate shares during weak market phases. This contrarian behaviour stems from a simple insight: bear markets often misprice businesses, creating dislocations between perception and reality. 

From an investor lens, this pattern becomes a signal. If a company’s fundamentals remain strong, and the promoter is buying while others sell, it could be an opportune time to accumulate. While not every case results in alpha, the probability of success improves when promoter conviction aligns with undervaluation. 

Selling in Bull Markets: Managing Liquidity and Risk
On the flip side, promoter selling during bull runs doesn’t always indicate something negative. In many cases, it’s simply a tool to de-risk personal wealth or fund new ventures. However, the context matters. If selling is accompanied by a deteriorating outlook, it could signal deeper issues. Retail investors should also be wary of frequent or aggressive offloading during euphoric times. 

Events That Reinforce Promoter Confidence
Promoters often buy shares when they foresee transformational events such as:

• Capital Expenditure (Capex) n Margin Expansion
• Operational Efficiency n Debt Reduction and Cash Flows These developments can improve future earnings visibility and signal structural strength. 
  
  

Outlook
Promoter buying during a bear market is often interpreted as a strong signal of underlying business confidence. However, its actual impact on stock performance depends on a range of factors, including the company's financial health, macroeconomic conditions, and broader market sentiment. For these stocks to deliver returns, an improvement in earnings performance in the upcoming quarters is essential. Investors should be particularly mindful of valuation metrics, ensuring that promoter optimism is backed by tangible growth prospects and industry momentum. 

While promoter accumulation can serve as a compass for value discovery, it should not be the sole criterion for making investment decisions. Retail investors must go beyond insider activity and assess fundamentals such as revenue visibility, profitability, leverage, and future expansion plans. In uncertain markets, even stocks with promoter support can continue to decline, especially when investors lack a clear understanding of the business or exit prematurely due to panic. Therefore, a sound due diligence approach is crucial. 

Promoter buying becomes significantly more meaningful when coupled with strong management guidance and execution capabilities. Companies that are guiding for capacity additions, margin improvements, or better capital efficiency tend to offer higher conviction opportunities. Furthermore, sectors positioned for structural tailwinds are more likely to outperform as the market stabilizes. 

Trends based on management commentary that witnessed Promoter Buying 

Industries such as cement and infrastructure, NBFCs, specialty chemicals, agrochemicals, pharmaceuticals, consumer goods, and oil and gas have witnessed visible promoter buying. In these segments, management commentary has remained optimistic despite near-term challenges, focusing on long-term strategies such as expansion, cost optimization, product diversification, and debt control. For instance, infrastructure and cement players are expanding capacity amid robust housing demand, while NBFCs with strong asset quality are planning for sustained loan book growth. Similarly, specialty chemical firms are investing in high-margin product lines, and healthcare players with strong CDMO pipelines foresee a demand recovery. 

In all these cases, the alignment of promoter actions with strategic business commentary enhances credibility. When promoters increase their stake while also guiding for operational improvements or future growth, it reinforces investor confidence in the business trajectory. 

Cement & Infrastructure - The sector has been undergoing consolidation, with larger players actively acquiring stakes in smaller companies to expand capacity. Strong infrastructure spending and housing demand continue to support long-term growth. 

NBFCs & Financial Services - While rising NPAs remain a challenge, companies with robust asset quality and diversified loan offerings have attracted promoter and institutional buying. Management in this sector is focused on long-term loan book expansion and sustainable profitability. 

Specialty Chemicals & Materials - Companies diversifying into high-margin specialty products and reducing dependence on traditional commodities have witnessed sustained management confidence. Investments in expanding production capacity and advanced materials indicate optimism in long-term demand. 

Pharmaceuticals & Healthcare - The industry has seen selective promoter buying, particularly in companies with a strong pipeline in API and contract development and manufacturing (CDMO). Management has signaled a recovery in demand and future growth potential. 

Conclusion: A Compass, Not a Shortcut
In times of uncertainty, when valuations are cooling and sentiment is shaky, promoter buying can serve as a valuable compass—but never as a shortcut. It reflects insider conviction, strategic foresight, and a belief in long-term business resilience. Yet, for retail investors, the real value lies in using this signal as part of a broader, disciplined framework—one that considers fundamentals, industry trends, institutional flows, and governance quality. A rising promoter stake, especially during a bear market, doesn't guarantee quick gains, but it often plants the seeds for future outperformance. As 2025 unfolds with its share of volatility and unease, those who stay grounded, observe promoter cues carefully, and invest with patience and clarity may find themselves ahead of the curve—long before the market catches up.