As investors cut their equity exposures in the last quarter of 2008, promoters of nearly 600 listed companies had raised their stakes substantially. Promoter holdings went up in a wide band, between 10% and 300%, during the panicky quarter after the Lehman Brothers? collapse.

Market experts reckon that with promoters of a vast number of companies pledging a part of their stakes with various banks and financial institutions, the sudden downturn in the equity market had forced them to interfere aggressively in the market to avoid margin calls from their pledgees. Some are also using this downturn to increase their stakes at lower levels and pledge more shares to meet their working capital needs and buoy up their share prices.

According to the latest shareholding pattern for the quarter ended December 2008, filed with the Bombay Stock Exchange (BSE), promoters of leading large cap companies like Reliance Industries (RIL), Tata Motors, Bajaj Electricals, Bajaj Financial Services, Hindalco Industries and UTV Software Communications increased their stakes in the range of 9% to 41%.

The promoters of Tata Motors, who have pledged 8% of their paid-up capital, have increased their stake by 41.21%—from 33.34% in the quarter ended September 2008 to 47.08% in December 2008. Similarly, the promoters of UTV Software, having pledged 23% of their paid-up capital, increased their stake by the same percentage.

Tata Motors management would have had to shell out Rs 4,000 crore had they thought of increasing their stake in the company in the first half of last year when the Sensex was running between 18,000 and 21,000 points. In the last quarter of the year, when the share price tumbled to Rs 150 levels, it would have cost the promoters just about Rs 988 crore to raise their stake.

The promoters of UTV Software increased their stake from 60% levels in September to around 83.25% in December 2008. So, while the promoters share grew by 71 lakh shares, they also pledged around 78 lakh shares (the date is not known). Once again, the promoters would have to shell out Rs 639 crore had they taken this step in the first quarter of the previous year. But they got it all for roughly Rs 145 crore in the December quarter when the share price tanked to Rs 210 levels.

?Post-September, when the hedge funds and FIIs started heavy selling in the market, promoter buying has definitely helped stabilise the stock prices. It is also quite possible that with promoters of many companies pledging their stakes, they had to resort to heavy buying to avoid the payment of margin money to their pledgees?, said Amitabh Chakraborty, president?Religare Securities Ltd.

However, Ramdeo Agarwal, MD, Motilal Oswal Securities Ltd, feels the promoters raising their stakes is a very positive signal to the domestic and foreign investors about the underlying value of the company.

?Promoters buying their own shares during the equity downturn would definitely give confidence to the investors. At these lower levels; promoters putting in their money indicate a company?s underlying values and long-term bottom for the stock.? In many small- and mid-cap companies, promoters had increased their stake by 200% to 300% during the December quarter. Among them are Pradeep Metals Ltd, JIK Industries Ltd, Goldstone Infratech Ltd, Pan India Corporation Ltd and Vas Infrastructure Ltd.

However, going forward, few market players believe the promoters would step in as aggressively as they did in 2008, given the liquidity crisis being experienced by the corporate India.

?The scenario has entirely changed now with the US credit market crisis worsening and the global economic slow down setting in. Now the promoters would not be having that kind of cash with them to aggressively interfere in the market in 2009?, says Alex Mathew, head of research, Geojit Financial Services Ltd.