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Insiders' take advantage of low stock prices

Management, promoter groups step in to buy in select companies.


Srividhya Sivakumar

BL Research Bureau If the frantic selling by foreign institutional investors in October has left you worried about how much lower valuations will go, here is a quantum of solace, for the month also saw many 'insiders' step in to buy stocks in their companies.

Enticed by the 'attractive' valuations after the market meltdown, insiders appear to have indulged in buying in select companies even as the markets hit successive new lows throughout last month. Be it large companies such as L&T, Suzlon Energy and Hindalco, or the mid and small-cap ones such as Edelweiss, Gitanjali Gems and IVRCL Infrastructure, buying by insiders has been quite significant.

Insiders, according to SEBI's Regulations (Prohibition of Insider Trading), are those investors who are in the know of that company's unpublished price-sensitive information.

While in the case of L&T, it was the company's Chairman and Managing Director, Mr A.M Naik, who bought a substantial number of shares in end-October, it was the promoter group IGH Holdings that bought into Hindalco. Among other companies that saw a considerable buying interest by either the management or the promoter were CCL Products, Blue Bird, Gati, IPCA Labs and Patel Engineering.

In the case of Reliance Power, the insider buying of 6.15 crore shares by Reliance Infrastructure was matched by selling by another insider – AAA Project Ventures – an entity fully owned and controlled by Mr Anil Ambani.

That said, not all insiders have been on a buying spree. Companies such as ITC and Dabur India registered sale transactions by their respective CEOs, of a small portion of their holdings.

Insider transactions, which are required to be disclosed to the stock exchanges, assume significance in these markets, as stock prices have fallen to new lows.

The fact that company insiders see value in their shares despite all the talk of an economic slowdown underpins their optimistic view that prices may have bottomed

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