More selling than buying by company insiders

Srividhya Sivakumar

Can stocks continue higher from here, or have they already risen too far for comfort?

That debate may still be on. But company ‘insiders’, in quite a few cases, seem to think that the time is ripe to sell their holdings.

Insider sales reported to the stock exchanges have outnumbered their “buys” in the past month. From the bluechip names such as ACC, L&T, Wipro and Suzlon Energy to the smaller ones such as DCW, IRB Infrastructure and Peninsula Land, data disclosed to the stock exchanges show that company insiders have been selling into the rally. Insider trades are tracked closely because company insiders are usually assumed to have more information about their company’s prospects than anyone else.

A trickle of sales

Top executives, board members and promoter families of a few large companies appear to have sold shares so far this month.

In the case of L&T, the company’s Chairman and Managing Director and the Whole-time Director & President (Construction) sold 1.8 per cent (40,000 shares) and 5 per cent (10,000 shares) of their total holdings respectively.

For ACC, it was a board member who parted with 18,000 shares.

Kotak Mahindra Bank too reported quite a few insider transactions. Apart from relatively small sales by some of its top executives, the bank saw over 8.5 lakh shares sold by Ms Anuradha Mahindra (wife of Mr Anand Mahindra). That Mr Anand Mahindra has ceased to be the promoter of Kotak Mahindra Bank (announced early June), may offer some explanation.

Mid-cap action

However, with the recent leg of the rally being driven by the small and mid-cap companies, it is the insiders of these companies who featured more prominently in list. Top executives in smaller companies such as OnMobile Global, Page Industries, Peninsula Land, Allied Digital, Marksans Pharma and Apollo Hospitals reported insider selling to the exchanges.

A Director of IRB Infrastructure also parted with a chunk of his shares, even as brokerages were dishing out “buy” reports on the company. Petronet LNG, Ambuja Cements, Gremach Infrastructure and JM Financial were among other companies in which insiders resorted to selling their shares.

Companies cash out

Insider selling apart, there have also been quite a few instances of companies using the recent surge in prices to unlock the value of their equity investments. Cases such as L&T selling 11.49 per cent stake in Ultra Tech Cement through the open market, IBN18 Broadcast offloading treasury stock to institutions and Tata Motors selling half its equity stake in Tata Steel to its promoter group to raise funds have cropped up in the past week. This could also be a signal that these companies believe that current stock prices offer an attractive exit point.

While it may be too early to call it a trend, that these insiders and companies aren’t waiting for their stocks to head higher and are instead seizing the opportunity now, suggest that the gains from here on may be capped. At least that’s what they seem to believe.