Does Every Exit Mean Something?
Our aim through TVS Weekly is to break down financial stories and concepts simply, explaining what happened and why it matters to you.
No Jargon, no Drama! Just stuff that actually makes sense.
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In this week’s newsletter, we’ll learn about:
How markets take promoter selling as signals?
What’s the KISS Principle?
My advice if you find research overwhelming!
Market Kya Keh Raha Hai Sir?
Ever got a text in all caps and paused, wondering if it’s excitement or anger?
That’s exactly how the stock market feels right now.
In June, promoters, PE/VC firms, and big investors sold shares worth ₹43,000+ crore through block deals. That’s huge.
No matter the reason, it’s a strong signal. When insiders step back, investors take notice.
Let’s break down what’s happening, what these sales mean, and how promoter selling often hints at what’s next for these companies.
What’s going on right now?
Before we understand this, a few basics first.
What is Promoter Selling?
A promoter is someone deeply involved in building or running the company. They often sell shares for their own interest, i.e., to raise funds, reduce debt, or manage family wealth.
Promoter trading usually happens in two ways:
Open market – Promoters sell or buy shares on the stock exchange at market prices. This method gives flexibility but less transparency about the full intent.
Block deals – Large chunks of shares are traded in a single transaction, often between big investors. These are usually pre-arranged and can quickly change ownership structure.
Either way, such moves bring liquidity, give entry to new investors, and can signal promoter intent. But large sales, especially near market highs, may also raise doubts about future stock performance or cause volatility.
So, what happened in June?
June saw an aggressive promoter selling through big block deals. Vishal Mega Mart and Bajaj Finserv alone accounted for over ₹15,000 crore in large transactions this month.
But it wasn’t just promoters, PE/VCs and large shareholders like Reliance that also joined in, with its exit from Asian Paints.
What’s curious is the timing. Most of these companies were trading at rich valuations, with an average P/E of 72 at the time of the stake sales.
Here is a list of the companies that had large promoter/investor exits & their valuations:
The very Human Mr Market
When people who have supported the business or know it best start exiting, markets often take that as a signal.
Why stake sales spook sentiment?
To answer that question, we must understand Signalling Theory in stock markets. This theory says investors respond not just to numbers but to actions.
Things like insider selling, buybacks, or dividends are seen as signals.
So when a promoter sells their stake, it sends a message. Maybe they think the stock is overvalued. Maybe they know something others don’t.
And because markets are made of people, those people start to think & doubt.
That doubt alone is often enough to shake confidence. This is where investors need to look deeper.
Separating signal from noise
To identify the signal, an investor must investigate the intent behind the promoter, either buying or selling shares.
Let’s separate the signal from the noise by exploring both sides of the story.
Two sides of promoter buying: Promoter buying often signals confidence and alignment with shareholders. But it can also be regulatory or meant to artificially boost sentiment. Without strong fundamentals, the signal may not hold.
Two sides of promoter selling: Promoter selling can suggest falling confidence or insider concerns. But it can also be routine, driven by SEBI rules or personal needs.
Now that we know the theory, let’s see how it plays out in practice.
When the signal is true.
The signal can turn out to be clear, or it can be ambiguous.
Example: Promoter Selling
Case 1: The Clear Signal
In 2019, Yes Bank’s Rana Kapoor sold ₹510 crore worth of shares after the RBI asked him to step down.
From a vocal long-term holder, this move deepened concerns about the bank’s stability at a time when sentiment was already fragile.
Case 2: The Ambiguous Move
In 2020, Radhakishan Damani of DMart sold ₹3,000 crore worth of Avenue Supermarts shares. The promoter selling such a huge stake looked like a sell signal, but the sale was to meet SEBI’s 25% public shareholding rule.
It was regulatory, not a sign of reduced confidence.
Example: Promoter Buying
Case 1: The Clear Signal
In 2024, Premji Invest bought ₹4,757 crore worth of Wipro shares through a block deal. As the promoter’s own PE arm, the move showed strong belief in Wipro’s future.
Case 2: The Ambiguous Move
In April 2024, Aditya Birla Group infused ₹2,075 crore into Vodafone Idea. It seemed like a show of support, but losses continued, revenue per user stayed low, and churn remained high.
The fundamentals did not change, so the signal faded.
In conclusion, signalling theory reminds us that every promoter move sends a message, but only context reveals whether it is a warning or just noise.
What do you think these promoter are signalling? Tell me in the comments!
Dalal Street Dictionary
Ever tried explaining the rules of a new game to a friend and realised you couldn’t do it clearly? That probably means you didn’t understand it yourself.
Investing works the same way. If you can’t explain your investment thesis, maybe you don’t understand it.
This is where the KISS principle comes in. Keep It Simple, Stupid.
Here, the idea is not to avoid complex investments just because they are complex. It’s to avoid anything you don’t fully understand.
If you can’t make sense of it, you probably shouldn’t put your money into it, right?
A good way to test this is by asking yourself one simple question. Can I explain this investment to a 12-year-old? If yes, it’s probably within your circle of understanding.
Warren Buffett used this principle when he invested in Coca-Cola. It was a product he knew, a business he understood, and a brand he believed in. So, he held it for decades.
But, how is this useful in markets?
Simplicity in investing pays off in more ways than one. Here are a few examples:
Builds conviction – When you understand your investments, you’re less likely to panic or second-guess during market volatility.
Adapts better – A well-understood portfolio is easier to tweak as life, income, or market conditions change. You’re not frozen by complexity.
Ages well – As your capacity to track and manage dozens of instruments shrinks over time, KISS keeps your finances clean, efficient, and stress-free.
Kaam Ki Baat!
That’s normal. But the mistake is trying to do everything at once.
What you really need is structure.
Start with a 100-day plan.
In week one, focus only on MD&As. Nothing else.
Then slowly move to concalls, analyst reports, and numbers.
It’s like learning to read.
First letters, then words, then sentences.
Research isn’t about speed. It’s about steady, layered understanding.
If you have more questions, comment below!
MEME OF THE WEEK:
What More Caught My Eye?
The bizarre Trump T1 Phone.
What is Zerodha up to?
Tata Motor’s JLR problem.
The most fun way to understand moats!
Why are mutual funds struggling to hire?
Recommendations
I recommend watching this candid and thought-provoking talk by Nikhil Kamath, co-founder of Zerodha, delivered at a student convocation.
A must-watch if you're navigating early career choices or grappling with the pressure of ambition. He reflects with refreshing honesty on money, anxiety, pretending to work, and wisdom on how to succeed without losing yourself in the process.
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Song of the Week:
This is Parth Verma,
Signing off.
A Great Newsletter indeed sir!
Every blog that I read of yours parth bhaiya it simply left me in awe.